The Core Wealth Fund Growth in Transition Economies

Transcription

1 The Core Wealth Fund Growth in Transition Economies

2 What we do Higher Ground produces long-term asset growth in transition economies Ø The Core Wealth Fund searches for misunderstood value opportunities predominantly in Central and Eastern Europe. We favour defensive, high-yielding stocks and bonds. Ø Cuban trade finance adds more yield and keeps us on the lookout for more profitable investments there should transition occur. Ø The result is a balanced and ungeared portfolio of equities and fixed income in countries where risk is falling but growth is strong. ATHENS 1

3 Where we come from Ø Richard Wood founded Wood & Company; the Prague-based investment bank in 1991 Ø Vladimír Jaroš currently serves as its CEO. Ø The firm s reputation and understanding of opportunities in Europe s new market economies make it an important ally for our fund. Ø William White brings decades of success in Cuba and Latam but also brings structuring and government finance expertise that helps in our other countries. 2

4 Where we invest 3

5 Why Transition Economies? There are many more emerging markets than there are Transition Economies...places where a shift in ideology creates seismic changes and a predictable re-ordering. We believe that the direction is clearer in Transition Economies and growth is stronger. 4

6 Performance Comparables PERFORMANCE: HIGHER GROUND CORE WEALTH FUND vs HEDGE FUND INDEX Higher Ground Core Wealth Fund* HRFX Global Hedge Fund Index Source - Bloomberg & Higher Ground SICAV plc *Before Dec. 2016, CWF had some holdings in more mature economies. Those holdings are removed in this data. To Dec. 2016, CWF produced % since inception vs % as shown here with only transition economy holdings. 5

7 Performance Comparables PERFORMANCE: HIGHER GROUND CORE WEALTH FUND vs INDEX Higher Ground Core Wealth Fund* MSCI EM Eastern Europe Ex Russia Index Source - Bloomberg & Higher Ground SICAV plc *Before Dec. 2016, CWF had some holdings in more mature economies. Those holdings are removed in this data. To Dec. 2016, CWF produced % since inception vs % as shown here with only transition economy holding. 6

8 Term Sheet Description of fund Open-ended, self-managed, professional investor fund incorporated in Malta as a sub-fund of Higher Ground SICAV plc and licensed by MFSA from April 8 th Liquidity Month end subscriptions/redemptions at NAV. 3 months notice for redemptions. Can be reduced at Directors discretion. Board of Directors and Investment Committee Richard Wood (Vancouver), Vladimir Jaros, (Prague), William White, (Havana), David Curmi and Michael Warrington, (Malta). for CV s. Investment Objective The investment objective is to provide its shareholders with capital preservation, limited volatility and long term capital appreciation from investments in transition economies. Investment Policy The Sub-Fund will generally invest in publicly-traded securities, other collective investment schemes and in cash and money market instruments. Classes of Shares EUR Class GBP Class USD Class Minimum Investment EUR100,000 or equivalent. Investment Management Fee 1% per annum of the Net Asset Value. Performance Fee 10% of gains with high water mark. Accrued monthly but paid out every 3 years. With equalization. Administrator Apex Fund Services Prime Broker Deutsche Bank Trust Company Americas Auditor Deloitte 7

9 Recent events Pegas Non-Wovens Takeover bid by Prague family office at 11x EBITDA. Exited with partners of Wood & Company at CZK1010. CZK438 entry price. Ukraine Government Eurobonds Ukraine offered to buy back $1.6bn of 2019/20 bonds at 5 ½% YTM. We sold most of the holding. After the restructuring in 2015 and the recent rally, we were about flat but made attractive current yields along the way. TerraVia Holding of convertible bonds was 4.8% of portfolio at end August 2017 with bonds trading then at 38 cents. Bankruptcy will return only 13 cents to bondholders. Our average entry price was 79 cents in Received 5 cents annual coupons. 8

10 Increasing holdings of: Triglav Dominant Slovenian insurance company growing in other SW European countries. Greatest marginal propensity to spend on insurance is at EUR15-30K of GDP per capita.where Central Europe is. Moneta Bank Strongly capitalised and well-managed Czech bank serving entrepreneurs, doctors and farmers. High dividend yield. Need an acquisition for growth. Kruk SA Cooperative debt collection means they purchase loan portfolios from banks at about 6% of face value and work creatively with debtors. Strongest in Poland and Romania but growth now in Italy. EBITDA margin of 46%. Net margin of 32%. Return on common equity 25%. Strong and motivated management. 9

11 Investment Hopper Benefit Systems 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. 10

12 Transition Economy Holdings Raiffeisen Bank 9% Cash 3% Cuba Ukraine Zavarovalnica Triglav 3% Cuban Trade Finance 37% Czech Republic Romania Wirtualna Polska 2% Kruk 4% Poland Slovenia CEE:Wide Cash Value by Asset Class Prime Car Management 5% TE Equities 51% Romanian Privatisation Points 1% Transgaz 5% Romgaz 4% Transelectrica 4% Fondul Proprietatea 6% Moneta Bank 2% Pegas Non-Wovens 10% Ukrainian Government Bonds 5% Cash 3% TE Fixed Income 39% 11

13 The Leadership Team Seasoned professionals in Transition Economies Richard Wood Board Member Investment Advisor Richard founded and led Wood & Company through postcommunist transition period to become the leading investment bank in CEE. Offices in Prague, Warsaw, London and others. Richard is the anchor investor and is in charge of asset allocation, structure and investor relations for Higher Ground SICAV plc. He is fluent in Spanish. William White Board Member Investment Advisor William served as the CEO of Republic Bank for 12 years, establishing the bank s Trade Finance business in Cuba. At Antillean, he is responsible for Asset allocation, regulation and deal decisions in Havana. William is a Chartered Management Accountant (UK) and holds an MBA from Wharton. He has lived and worked in Havana since

14 The Leadership Team Seasoned professionals in Transition Economies Michael Warrington Board Member Investment Committee Member Michael has held various senior positions with leading entities in Malta. He started his career with Bank of Valletta Plc, moving on to Airmalta Co Plc, and subsequently the AX Holdings Group of Companies. Until recently Michael was the Chief Executive Officer of Novum Bank Limited and a member of its board of directors. He has held board positions with GO plc and Malta Properties Plc and AX Investments Plc all of which are listed on the Malta Stock Exchange. He is currently the Chief Executive officer of the AX Holdings Group of Companies, a director of AX Investments plc, Forthnet A.E, Citadel Insurance plc, Nissan International Insurance Ltd and Valletta Cruise Port Plc. David Curmi Board Member Investment Committee Member David runs Curmi & Partners, a multi-generational fund management business in Malta. Before taking over from his father in 1995, he worked at James Capel in London. He holds a degree in Economics from Oxford Brookes University. Vladimir Jaros Investment Committee Member Vladimir Jaros is the CEO of Wood & Co. In his 25 years at the firm, he came up through research but then worked for and eventually ran the firm s investment banking advisory business. That department has grown to be the leading regional investment bank, with landmark transactions such as the privatisations of ČSOB Bank, Czech Telecom, Slovak Telecom, Matav, (Hungarian Telecom), Globtel, and numerous capital markets transactions including the first ever Czech IPO; Zentiva and the largest ever mandatory buyout in the Czech Republic; Czech Telecom. Vladimir is a personal investor in the Higher Ground SICAV plc and serves on its Investment Committee. 13