Greece needs stability; Brexit would ruin that – Attica Wealth Management

Transcript

The global economy got off to a subdued start in 2016, with investment sentiment in Europe reacting demurely to the uncertain climate. Theodore Krintas and Stelios Stylianidis of Attica Wealth Management talk about Greece’s green shoots, the disruption that a Brexit might have on the country’s recovery, and Attica’s strategy to follow wealthy Greek investors overseas.

World Finance: The global economy got off to a subdued start to 2016, with investment sentiment in Europe reacting demurely to the uncertain climate. With me to discuss the economic environment in Greece are Theodore Krintas and Stelios Stylianidis of Attica Wealth Management.

Well Theodore, if I might start with you. Greece of course has had a rough few years of late. Bad loans still make up half of lending, and capital controls may stay in place until next year. So, any green shoots on the horizon?

Theodore Krintas: Well Jenny, we see a couple of those in the short-term, and maybe a handful in the middle- to longer-term.

Europe has decided it will not lose the war of reunification in Greece, and this is very, very important, because they’re very helpful. At least, that’s the way we at Attica Wealth Management see it.

Now at the same time, capital controls have imposed serious problems in our own industry. It’s putting a lot of pressure on it. At the same time, many, many Greek companies have become more extroverted – so, now they see, they have exports in their long-term plans. So exports are not future plans: the future is happening right now.

So I really believe these are a couple of very important changes, because we have been living somebody else’s life for a long time; and now we seem to be living our own life. So hopefully in the months or years to come, we’re going to see some positive reaction on that.

World Finance: And of course Stelios, Europe is gripped by the possibility of a Brexit. Now should this happen, what would that mean for Greece, and what do you think the knock-on effect would be?

Stelios Stylianidis: The direct impact for Greece would be on tourist arrivals from the UK. The UK market is the second biggest market for Greece – both in terms of arrivals and income.

But more important for us is the indirect effect. Our economy is in a very fragile position – a stable external environment is essential. A Brexit is exactly the opposite, as it may disturb the foundation of the European Union.

If Brexit materialises, then we’ll be talking again about a Grexit. And after Grexit, who knows? The European Union might have some serious problems.

World Finance: Theodore, of course investment sentiment has been down throughout Europe; and this hasn’t been helped by dropping commodity prices. So how are you responding to this?

Theodore Krintas: Well first of all, we have to remember that investors are human beings. And human beings are not very comfortable with changes. So although we are in a much better era – cheap oil, as opposed to peak oil – investors don’t really like what is happening. So now, many concerns are gathered around the fact that oil producing economies may face serious issues; and as a result a slowdown in the world economy.

We seem to be very afraid of a possible global slowdown. What we have to say as an economist is that a slowdown will happen within the next few months or few years. And we have to be prepared for that. On the other hand, many of us say that these bad sentiments are a kind of self-fulfilling prophecy: everybody’s expecting it, and as a result it might happen.

World Finance: And Stelios, what sort of trends are you currently seeing in the market?

Stelios Stylianidis: Currently we see uncertainty for about everything among the markets. Global growth concerns, deflation fears, and central bank policy divergence are three major issues that cause uncertainty, and lead to extreme market volatility.

So we see a trend from all of this uncertainty, and that is in investing in a multi-asset context, focusing primarily in international diversification and the minimisation of risk.

World Finance: Well Theodore, as Stelios just mentioned, multi-asset investing: it certainly does seem like the safer choice moving forwards. How are you approaching this?

Theodore Krintas: Multi-asset is one part. The other portion of our solution is actually low volatility investment, low volatility asset management.

We have to find ways to avoid losses in case of a world synchronisation. So we understand that we cannot follow investment based simply on international diversification according to Markowitz.

Low volatility means capital preservation, and in this world of low – even negative! – interest rates, capital preservation becomes a must. And this is the way we see that we should invest for the near future.

World Finance: Finally, talk me through Attica’s strategy moving forward for the coming years.

Theodore Krintas: We should focus on internationalising our business in the coming years in two ways.

The first one has to do with the fact that many Greek investors, during the crisis, have already taken a lot of their funds abroad. So we want to follow our Greek clients abroad, offer them wealth management solutions, while their funds are outside Greece.

And secondly, we believe we should also be offering business-to-business services, to peers of our own, internationally. Based on the fact that during the crisis, we needed to cut our cost base a lot. Senior investment managers in Greece cost one third of what they cost here in London, for example. So we can translate these cost advantages into a lower price, and offer it as a nice service to our peers.