The interview of Vachik Gevorgyan, Head of Balchug Capital’s Armenian Office, with Banks.am

- It has recently been announced that Balchug Capital opened an office in Yerevan. Could you please provide a brief history of the company and its main activities?

- Balchug Capital was established in 2010 in Moscow, Russia. It specializes in global event-driven and value investments with a particular focus on Russia and other emerging markets. The firm’s investment thesis centers around identifying fundamental value in mispriced securities that may get re-rated by the market as a result of certain events and relies heavily on the its high-quality research and experience in individual markets. Actively managed, Balchug’s concentrated strategy offers investors opportunities not accessible through passive investments.

- David Amaryan, founder and CEO of the company mentioned about his Armenian nationality and desire to contribute to the economic development of the homeland by entering Armenian market. However, I think you would agree that business has a simple rule - to make profit. In this regard, what is the business motivation of coming to Armenia and what are the activity targets in our market?

- We are very much interested in seeing Armenia’s capital markets become much more liquid and investable. This is not the case today, especially if we are talking about equity markets. However, we are hopeful that, with all the recent changes in the country, Armenia will attract significantly more foreign investments and the economy will grow steadily at a much faster pace. We at Balchug are ready to assist in any way in this process and will play a bigger role in Armenia as opportunities arise.

Today Balchug is interested in Armenia’s human capital. We believe that the country has a lot of bright individuals that could add value to our operations and Yerevan office’s first goal is to become a research base for the fund’s activities in various emerging and developed markets.

- Balchug Capital enters the Armenian market amid the crisis. Is this a special tactic?

- I should say that Balchug Capital entered the Armenian market before this crisis. In addition, we consider COVID-19 as a temporary challenge that does not affect our future goals in Armenia, as they are more long-term.

- Securing investments is the number one issue in the Armenian economy. In order to do that, an appropriate environment is needed. Does Balchug Capital have its own ideas for improving it and does Balchug intend to make recommendations to the Armenian government in this regard?

- Balchug’s current infrastructure provides absolute safety for our shareholders. It is set up according to the highest international standards through top-tier counter-parties, with all the safeguards in place.

We believe that it is critical to have similar safety standards in place in Armenia and we plan to discuss this with various agencies including the central bank and assist in any way possible.

- As far as I know, David Amaryan previously worked at Troika Dialog Investment Company. Nowadays, some of the company's former employees are taking serious steps in the international financial universe. It seems that this is a unique opportunity to utilize the existing network and bring investments to Armenia.

- That’s true, David worked at Troika Dialog. Besides Troika, David worked at Citigroup in Moscow and Alliance Bernstein in New York, and he has been running the hedge fund for the past 10 years. All of this experience is important and will be fully utilized in our efforts to make Armenia more attractive economically and to spread the word that Armenia is open for business and foreign investments. We are here for the long haul and believe that we are in the beginning of successful journey in Armenia.

- What will be your duties as the head of the office?

- I would highlight the following priorities for my current position: a) Create a solid research base and provide an analytical support for the fund; b)Interact with local and foreign institutions and if necessary provideadvice and support in making Armenia’s capital markets more liquid and investable and the economy in general more attractive for foreign investments.

- In 2009 you became the winner of the "I Overcome the Crisis" student essay competition organized by Banks.am. Did this fact play a role in developing your professional career? What are your current ideas on overcoming the crisis?

- Winning the Banks.am competition helped me a lot to gain confidence and passion towards the development of my professional grasp in the future. In addition, the fact of winning the competition was very positively accepted by all employers with whom I have ever had the opportunity to work.

As for overcoming the economic obstacles resulted from the current coronavirus crisis, in my opinion, Armenia should focus more on creating a favorable environment for attracting innovative investments into the country, including the development of a flexible tax system and institutional capacity. Taking into consideration the small size of the local market and geographical location of our country, the economy has no other option but to expand the value-added export sector of the economy.

Khoren Ormanyan talked to Vachik Gevorgyan