As a child, Archil Gachechiladze, Chairman of the Supervisory Board of Galt & Taggart Investment Bank, dreamed of driving a construction truck. He believed that majestic vehicle was the biggest of them all. As it turned out, he failed to realize his childhood dream, but now he sits at the helm of the largest investment bank in Georgia.
With an MBA from Cornell University, and a stint working for the famous Lehmann Brothers under his belt, Archil Gachechiladze returned to Georgia with the goal of creating a private investment fund. But when he accepted the position of Deputy Director General of Corporate Banking at Bank of Georgia (BoG) he found himself “a banker by accident”. He says that his plans to form a private investment fund were thwarted by external factors as “they simply coincided with bad times.” After all, it was 2008, and Georgia had just fought an unsuccessful war with its neighbor to the north.
Private investment is one of the main specialties of Galt &Taggart, but the company has other directions as well. Former BG Capital, which received a second breath in 2012, has been operating on the market since 2000. The company offers a full complement of investment services for its clients, including brokering services related to shares and bonds, investment banking, assets management services, as well as sectoral research of the economies of both Georgia and Azerbaijan.
Galt & Taggart’s new life began when they began to enhance their research, after Gachechiladze moved from BoG’s corporate sphere into the assets management sector.
“We’re trying to make sure that our business partners and clients understand the Georgian economy and the region’s economy as a whole, including various sectors like tourism and energy. If any of those areas are attractive in terms of investment, we want to translate this attractiveness into figures for our partners, and explain the main risks to them,” explains Gachechiladze.
Since 2012, Galt & Taggart has managed to privately place or publicly offer bonds on the Georgian Stock Exchange. This included GEL 75 million (European Bank for Reconstruction and Development), GEL 30 million (International Financial Corporation), $35 million (m2 Real Estate), $10 million (Georgian Leasing Company), $15 million (EVEX Medical Corporation) and GEL 6 million GEL (Georgian Water and Power). In addition, the primary public offering of 29% of Georgia Healthcare Group’s (GHG) shares on the London Stock Exchange was successful, and as a result, the company managed to mobilize $100 million.
The total amount in assets managed by Galt & Taggart, including the deposits of Wealth Management (WM) clients, WM clients’ assets in Bank of Georgia, brokering clients’ assets, and Aldagi’s pension scheme assets, (with 21.4% annual increment) exceeded GEL 1 billion by the end of 2014. Out of that figure, the sum of GEL 805 million is made up from the deposits of WM clients, which increased by 18.5% compared to 2013.
“We actually started from scratch. We had a very low baseline, and while we’re taking the first steps now, we believe we have a long and interesting road ahead of us,” notes Gachechiladze.
There have already been some achievements to speak of. In November, Galt & Taggart became an exclusive partner to the Danish Saxo Bank in Georgia, and offered the public an online trading platform called G&T Trader. This platform enables the company’s clients and others to make investments using global financial instruments (shares, bonds, FOREX, CFD, futures, options), and to buy and sell securities from the leading companies.
The new product, which was intended for the middle and upper-classes, was met with much interest. G&T Trader has now more than 150 clients, which is quite an impressive figure if one takes into account the fact that Galt & Taggart’s Wealth Management Department offers its services to a total of 1,400 clients.
“We interact with many well-to-do people that have their own assets. This is actually the first generation that has managed to accrue a certain amount of capital over the last 15-20 years. If up until now they’ve mostly been placing their capital in bank deposits, they now have more demands. There are those who opened bank accounts abroad for making various types of investments, but still they are more comfortable with local services and our activities. In essence, G&T Trader acts as a window into the rest of the world’s financial realm,” Gachechiladze says.
Based on the negotiations with Saxo, he says that G&T Trader is just the first step. The next step will be making the purchase of Georgian assets through the Danish bank’s system a possibility. This in turn would enable Saxo clients all over the world to invest their capital in Georgian treasury or private company bonds.
It seems that Saxo Bank truly believes in the Georgian market, and G&T Trader acts a window for that bank as well. In this case however, it has become a window through which it can access the whole region. In fact, the opinion voiced by the founder and executive director of Saxo Bank, Lars Seier Christensen, is that Georgia has a very important role to play in being a reliable and stable hub for financial services in the region.
“We view Georgia as a window to the whole region. This country is a kind of a safe-haven for the financial sector, which could be developed in many directions. It’s important to understand that this is not a one-way street, and as a result of our cooperation with Galt & Taggart, a window for investment is opening. In the long run, Georgia’s potential will become more evident to foreign investors. As such, with the development of the capital market, foreign investors will direct their investments to Georgian bonds and shares,” says Seier Christensen.
Gachechiladze believes that the capital market in Georgia is developing slowly, but in a very interesting manner. He believes that if certain legislative amendments are enforced, the Georgian market will become even more active.
“Companies are not only ready to have loans in banks, but also allow those banks to securitize these loans and turn them into bonds, which include other parties in the syndicate that enhance financing sources. Companies need to have a certain history for that; they must be audited, and there are such companies that exist already. If you asked me ten years ago, I’d say there are only a few companies like that, but today I can say that there are at least 25-30 companies like that now. They need a certain kind of support, and our function is that we support them and try to walk the road leading to public offerings together,” Gachechiladze explains.
Before the bonds and shares of up to 30 Georgian companies become available to investors, G&T Trader offers those who want to diversify their assets the opportunity to invest in foreign and Georgian companies that are operating in international stock exchanges. Before creating G&T Trader, Gachechiladze was a client of Saxo Bank himself, and as an experienced trader, he advises beginners to look at that process as a means to diversify their own financial assets, rather than a game of chance. He mainly trades in shares, and is not interested in trading in foreign currencies. He favors the companies that constantly introduce new, innovative products.
“For example, Google’s shares are interesting to me. They constantly surprise me with their innovations. Many people don’t even realize how many new things are being developed under the Google umbrella,” Gachechiladze notes.
Professional traders working for Galt & Taggart offer advice to G&T Trader’s new clients – during the implementation of difficult options strategies for example. However, their mandate doesn’t imply offering advice on which company these new clients should invest in. Clients must take the responsibility for such decisions themselves.
“However, if our client wishes to invest a certain amount of capital abroad, we recommend that they purchase the financial index of the American Stock Exchange. Because of this, the client is proportionally allocating a certain part of his/her property in the whole American stock market with long-term prospects,” says Gachechiladze.
Only the transactions are chargeable at G&T Trader. According to Gachechiladze, the rates are 10 times cheaper than the services offered by any brokerage firm.
“I would recommend starting with a small amount in order to see how the platform works and what it offers, so that one can make long-term calculations,” advises Gachechiladze with regard to clients who are new to the process.
So how likely is it for the service, which is now oriented towards the middle and upper-class segments, to become more universal and include all segments? Gachechiladze believes that a long road has to be traveled till then.
“One positive thing this will entail is that people will pay more attention to the economy, and therefore political decisions will be viewed in an economic light – whether it supports business, or not. When a country starts to think about business and the economy, it starts to develop much more quickly,” Gachechiladze emphasizes.
In his opinion, this is one positive byproduct that comprehensive development of the stock exchange and trading could bring.
However, such positive effects may not be limited to only those developments. For example, rather than dream of driving big trucks in their childhood, future investment bankers may instead dream of creating successful corporations whose shares are desired by all traders.