BDO Armenia, a member of BDO International Limited, one of the world's largest audit, tax, and consulting networks, and Orion Worldwide Innovations, a hub for startup growth and ecosystem acceleration, announce the launch of the Power Consulting Days program in Armenia.

The program is essentially a 12-month mentoring club aimed at supporting economic development in Armenia by providing businesses with advice on alternative investments.

Banks.am spoke with Aharon Chilingaryan, Partner at BDO and head of tax, international trade, and legal services department, about developments in the alternative investment market, cooperation with Orion, and the newly launched Power Consulting Days.

Alternatives are Always Good

Alternatives are always beneficial as they improve decision quality. By alternatives, we mean options for people with money to invest, beyond traditional directions. For example, depositing money in a bank is considered a traditional option. Now, there are alternatives such as investing in various business projects. Many ideas would simply be lost if bank loans were the only option and there were no alternative sources of funding.

Alternative investment funds can be roughly divided into three main groups. The first are individual investors or angel investors. The second are established venture funds, like Granatus Ventures, the first created in Armenia, regulated and overseen by the Central Bank of Armenia. The third group is private equity funds, which involve more extensive investments, where large established enterprises invest in major projects. Securities markets, such as government bonds issued and controlled by the Ministry of Finance, should also be noted as a separate investment direction.

Informed Decisions Reduce Risk

In my opinion, being well-informed allows for making safe decisions. A good example is the pension reform when the mandatory funded pillar was introduced in Armenia, international funds were invited, extensive awareness campaigns were conducted, and long term discussions were held about the guarantees of that system. The alternative investment field has already had a pilot phase, and risks have emerged there. For example, a bank cannot manage the funds of an investment fund at its discretion or make transfers; regulations are quite strict, hence the risks are lower. Moreover, the regulator itself has a risk matrix and mitigates excessive risks through accountability, leaving the business risk to the entrepreneurs' decision. According to the investment law, a specific threshold for making investments is also set, and only qualified and informed investors can pass the threshold. The system is controlled by the Central Bank of Armenia.

Alternative Investment Market Globally and in Armenia

In 2022, Corporate venture capital (CVC) funding has reached an impressive $55.1 billion. In 2023, private equity-managed assets worldwide reached around $4.7 trillion, and venture capital-managed assets hit $1.2 trillion. In Armenia, the combined corporate venture funding and private equity managed assets amount to about $600 million. There are fewer private equity companies compared to venture funds in Armenia. While there is little data on angel investors as they are individuals, they are quite active in Armenia, forming associations and developing this direction.

Developing a Safe Environment and Legislative Issues

First, perceptions need to be formed. All players should put all factors, tools, systems, organizational capabilities, and so on on the table together. Gradually, there should be enough discussion and debate so that the wider public becomes aware and starts using these tools and opportunities. This means that corporations that go down this path will benefit. It will also create alternative competition compared to banks, which in return may lead to more affordable rates.

The experience of the world says that, as a rule, it is more useful not to invest the money as a deposit, but to accumulate a little knowledge, take a little risk and go to the field of alternative investments, which offer greater flexibility. Banks naturally tend to be more conservative because they manage the finances of thousands of people. At this stage, it would be premature to discuss the shortcomings of the alternative investment system. First and foremost, we must understand, promote, welcome criticism, allow the sector to thrive, and pave the way forward. Establishing 'hearing receptors' is essential.

There are types of funds that do not currently exist or operate in Armenia, despite being allowed by legislation. It is crucial to ensure that newly emerging global fund types are incorporated into Armenian legislation. For instance, hedge funds are legally permissible but face significant implementation challenges; progress in this area would be advantageous. The establishment of Credit Funds is another pertinent example. Additionally, expanding into the realm of corporate management, Armenian legislation does not cover enterprise groups, which could facilitate mergers and divisions. These transactions can also generally be classified as alternative investments and financing.

It would be appropriate to address gaps gradually, after conducting numerous experiments and accumulating data. That is the law implementation phase. During this period, the Central Bank of Armenia (CBA) can also issue clarifications in specific private cases; for instance, recently such a publication took place regarding crowdfunding.

Power Consulting Days and Cooperation with Orion

We have been cooperating with Orion Worldwide Innovations for 2.5 years. By combining the potential of Orion beneficiaries and the potential of BDO, we expand people's horizons. In the fall of 2022, we jointly organized a conference on alternative investments in Yerevan, where we had many international guests. Representatives from the government and the Central Bank also joined us. Additionally, we have organized several meetings in various other formats.

Power Consulting Days is a series of seminars and practical professional sessions where businesses will gain essential knowledge in investment and related areas from leading Armenian and global specialists, along with insights from success stories. Participants will receive comprehensive updates on the current economic landscape, the legislative framework governing investments in the Republic of Armenia, and recent developments.

We have invited leading specialists from successful international companies, such as Hayk Grigoryan, General Partner and Chief Investment Officer of the emerging hedge fund SharpeMachine LLC. Kevin Allen is also an energetic and creative individual who positively influences those around him through exponential technologies and the ExO model. Fernando Gómez-Baquero, the Director of Runway and Spinouts at the Jacobs Technion-Cornell Institute of Cornell Tech, will also be visiting Armenia.

We will start the meetings in September, with the first topic being "How can corporations make exponential profit alternatively via funds?" Registration is already open. Participation can be for 6 months or annually, with a fee of 163,000 AMD per month. At the end of the meeting, participants will be able to ask their questions and freely interact, establishing business connections with other participants and guests. This will provide invaluable experience. There are no sectoral restrictions; anyone can apply. We are also trying to involve government bodies to participate as well. Online participation is also possible.

Nune Grigoryan

Photos by Agape Grigoryan