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 Partner and CEO of QVT Financial LLP Angelo Moskov talked to BORYAD Magazine "Turkish market has difficulties with adopting Corporate governance"
QVT is an global fund which has considerable investments in Turkey. CEO Angelo Moskov sends the message; "We'll go ahead with investments in Turkey" but also underlines his reservations about corporate governance.
The Turkish public in general has known QVT through its partnership with Galatasaray. Can you give us information about the fields of activity and business framework of the QVT fund? QVT manages two global multi-strategy hedge funds. In addition it manages a separate trading account for Deutsche Bank. We invest in various strategies and sectors ranging from relative value arbitrage, index arbitrage, short-long trading. Total assets under our management are over $9 billion. You have stocks in stock exchanges of 57 countries worldwide. As an global fund, what are your primary criteria in making investment? What do you pay attention to when investing in developing countries, as different from investing in developing markets? We mostly look to buy value stocks when they are traded low, and sell or short sell overvalued ones, while at the same time keeping neutral to the general market moves. This means we are usually short at least 30-50% of instruments in our portfolio. In Turkey, you have US $ 150 million investment in money market and US $ 200 million investment in stocks. What kind of problems have you faced when investing in Turkish markets? Over the year we have experienced various problems but the most significant ones are related to corporate governance in Galatasaray and Tire Kutsan. Galatasaray management thought that just having millions of fans, exempts them from corporate governance principals. In their IPO representations they declared Galatasaray will be a revenue company, and after two years they tried to execute a merger which violated those binding representations from the offering memorandum and a clear attempt to disadvantage minority holders. Tire is an interesting case as well. After having reported modest numbers for some years, suddenly company give clear guidance up huge profitability increase which is completely inconsistent with past reporting. Some valid questions have been raised by investors: If official profitability guidelines suddenly jumped so much, how come the company was sold was with a so low market value? Could it be that the real price it was sold is much higher that the reported deal price, simply to help the foreign buyer avoid paying higher price to minorities in tender offer? Maybe its worth investigating the issue further. Do you have a plan either to increase or cut down the volume of your investments in Turkey? Generally, we hope to increase our investment in Turkey as the market offers more and more opportunities. Through the eyes of an institutional foreign investor, what kind of arrangements in Turkish markets will be beneficial? Firstly we should force companies to take full responsibility when making misleading representation or issuing profitability guidance before the public. And government should also put tough rules and disclosures on related company loans which allow companies to manipulate earnings. Placing more strict requirements on mandatory takeovers so that the prices reflect real value of business and not statistical calculations from prices, can also be an important step. QVT has a direct knowledge about Turkish stock exchange. Under the light of this knowledge, how do you see the corporate governance policies of big companies trading at ISE? At which level is it when compared with European countries and the U.S.? Corporate governance in Turkey is still much behind major EU markets. Its one of the weakest features in this market. Would you think of assuming the role of an independent member on the board of a company in which you are a shareholder? Have you made such demands to companies in Turkey in which you have invested? Yes we asked in Tire Kutsan to become a board member to represent minorities and we were told that the “Company does not like this idea and there is nothing wrong with the current board.” Interesting argument! I guess Tire believes that the only time shareholders should be represented on the board is when they themselves think it is ok. Reminds me very much of the Stalinist approach to ‘democracy’. We are lucky that our governments do not have the same attitude in political elections; otherwise we will live in terrible dictatorships. Mortgage market is still in the formation period in Turkey. There are both positive and negative evaluations about the future of this market. What are your views on the future of real property sector? Do you think of making new investments in this field? Yes, this is a very interesting field and we will look for opportunities it invest. Can we learn your views on BORYAD which is the first non-governmental organization ever to represent shareholders in Turkey? I praise the initiatives BORYAD has taken. I am very glad that this organization exists and its very active in Turkey because it tells me people take seriously the developments of the stock market and and we look for a better future because of BORYAD’s efforts. |
