The Higher Ground Core Wealth Fund has, for 7½ years, fulfilled the wealth management needs of its founder and a small group of outside investors. Central and Eastern Europe has been the backbone of the portfolio. Until recently, technology and special situations were less available in CEE so were added from outside the region. Now, CEE has its share of interesting technology stories and the markets there are active enough to present special situations. There is a level of transparency and professionalism in CEE that allows us to concentrate the fund there. From the start of 2017, the Core Wealth Fund will be substantially fully invested in transitioning formerly communist countries.
Looking back, our idea generation in CEE markets has been very good. This presentation examines that historical record and the human elements, which produced those returns over the past 7½ years.
We search for misunderstood value opportunities predominantly in Central and
Ø Diversification across CEE provides stability. Tech and special situations outside
that region added growth.
Ø The result has been a balanced and ungeared portfolio of equities, bonds, and
quoted real estate.
Ø All our investments trade on a quoted market1.
Moneta Money Bank, Formerly GE Bank, Czech Republic. Well-managed consumer and SME bank with assets more than covered by own deposits on which they pay blended 17bps. Over-capitalized at 17.7% tier 1 cap ratio. Can they increase the asset side without dropping quality or margins? Expect high div flow. Little pricey but GE will sell their last 18% around year-end. Look to buy then on dip.
Largest Polish internet portal, reaching 19mm = 76% of internet users. Largest email provider with 10.5mm active accts. Online advertising and commission payments from e-commerce for click-throughs and sales. Impressive management. Online share of total retail last year was 3% in Poland, 8% in EU and 13% in US.
Their MultiSport cards allow 9,000 corporate clients to give non-payroll benefits to 800,000 employees/cardholders. Cards used for access to health club, pool, yoga, gym but also movies/concerts. Own 104 clubs but cards give access to 25,000 facilities. Polish sport club usage at 7% of population – same as France/Italy but half of UK/Holland penetration. 22% of Polish companies use them. Growth may come from startups in Czech/Slovakia/Bulgaria. Too expensive. Monitor.
Polish Stem Cell Bank
Third largest private stem cell bank in Europe. Prospective parents are introduced by ob/gyn docs. Child’s stem cells are taken from umbilical cord and placenta and stored to combat later cancers. Clients pay about EUR100p.a. CPI linked. Great presentation but too small at mkt cap EUR60mm. Growth may come from subsids in Turkey, Hungary, Romania, Spain. Pricey at 30 x 2015 earnings. Monitor.