The management team has many years’ experience in investment banking and consulting, including a heavy emphasis on cross border transactions. There is no shortage of great ideas around the world that could expand globally. In most cases, what keeps great ideas from blossoming is the small size of the company that owns the business in its home country. It is exceedingly difficult for small companies to grow, let alone reach out outside their home country. This is a great investment opportunity that promises outsized returns. 

In the majority of cases, our strategy is to invest in “opportunities”, not “companies” and/or “products”. This may sound a little strange and unorthodox, but it has a real effect in how we approach the construction of our portfolio. A well-run company that produces well-made products at competitive prices is not, by itself, a candidate for an investment. What needs to be true also is a well-defined market opportunity that the company in question can exploit and, in the process, create extraordinary economic value for its shareholders. For example, a market gap, or a new market that does not exist today, or a twist in an existing product or service that is so innovative that it will take years for the competition to catch up. The investment philosophy here is disruption, paradigm shift, and creation of new markets.   

I would say that the main difference is that the investment portfolio here is developed before any capital is raised. Most other alternative investment funds commit to investing in the industry (e.g. technology or pharmaceuticals or energy) or the security (e.g. mezzanine or medium-term notes or convertible bonds) in which the management team has experience in. The funds are raised and then the management team starts looking for appropriate investments, which must be made within a set period of a few years after raising the fund. In this case, the capital will be invested in one year or less, because we the deal pipeline is already developed and the preliminary work is complete. 

Contrary to the usual practice in the industry, the management team is not passive recipients and reviewers of business plans. We have spent, collectively, around 100 years in investment banking, in three continents, in some of the top investment banking houses, and we have informed views of industry trends, and a wide network. There is a high-level view of the markets that we have experience in, and we are in a position to know the gaps and the opportunities that exist. In addition, the source of market and industry intelligence and management talent to be deployed in the portfolio companies is a wide and deep network of contacts, built over decades.

In some cases, investments will be in existing companies that have developed products or services that will grow faster and bigger by being transplanted in a larger market. In other cases, a management team will be assembled, and a startup company will be seeded to exploit the market opportunity that exists in the particular market. In a few cases, the existing management team of a portfolio company will be strengthened with managers picked by the management team and the new team will be moved to the larger market. 

In many cases, the team has developed innovations that have eluded incumbents, which will shift the paradigm of doing business in that industry. In many instances it takes an outsider with a fresh eye to see what people steeped in a tradition cannot see. The team has developed or unearthed a number of synergies, economic efficiencies, and innovations that will drive economic value creation in about three fourths of the portfolio. The rest of the portfolio investments rely on value creation through mergers and going downstream to maximize profit margins. 

There are two areas of particular strength: 

1. Straddling countries and cultures.
   The management team comes from Germany, Canada, the United States, Britain, and Greece and they have decades of combined experience in investment banking, trading, asset management, risk management, investor relations, consulting, advertising, and marketing. We have worked in these areas from executive positions in Europe, the Americas, Asia, and Oceania. Our network extends to more than 20 developed countries worldwide, and we regularly pull expertise and advice from diverse sources to achieve our goals. Therefore, this is a valuable and unique institutional capital that we have built over the years, which will be deployed in assembling and managing the portfolio of the fund.
2. A strong sense of creating economic value for financial markets.
   Our backgrounds in almost every aspect of finance means that we are strongly focused on creating economic value that is recognized and rewarded by financial markets. At the end of the day, most of the investments will be disposed through a sale in financial markets. To achieve the maximum returns for the fund’s investors, the price at which the portfolio investments are divested must be as high as possible. For that to happen, the companies must have been managed to achieve maximum valuation when sold. Another way of saying this is “the companies must satisfy the criteria that financial analysts have for assigning top ratings in stocks.” What are those? For example, top EBITDA margins for the industry. Or, compound average growth rates (CAGR) that are at or near the top of the prevailing industry rates. Or management practices that financial analysts consider value-creating. When these, and other, conditions hold, the equity analysts at banks and asset management houses assign top valuations to companies’ stocks and those are the companies whose market capitalization is the highest. In other words, achieving top valuation in financial markets is a complex process that involves a number of parameters – some uniform, some particular to the industry – which must be nurtured over time, and embedded into the management practices of the company. The members of the management team have spent their careers identifying these parameters and managing based on them.

The European Union, the United States, and Canada together account for approximately 50% of world GDP. So, by focusing on just 5-6 countries, our target market is more than 40% of the world’s income and wealth. These are the largest and richest markets in the world. If you are investing for maximum return, you cannot be anywhere else. This is where starting a new business is the easiest. This is where consumers have the most disposable income. This is where people adopt more easily new concepts, products, and services. It is no accident that the US, Canada and the top countries in the European Union are the top global destinations for Foreign Direct Investment: they are the most hospitable business environments, where it is the easiest to succeed.  

Of course. In more than 90% of the portfolio, all of the following conditions must be met:

1. There exists a clear market opportunity for the product or concept in the European or North American market and beyond. The opportunity may be an existing and fast-growing market for the product or service or the prospect of success in the target market based on similar success in other markets.
2. The portfolio company can benefit from moving its operations to northern Europe or north America, both in terms of maximizing shareholder value and from an operational standpoint.
3. We can acquire majority control of the company and be actively involved in its strategic and tactical management. The Fund will avoid taking minority stakes in its portfolio companies and will not be a silent partner of its portfolio companies.
4. We can either appoint the company’s management (in the case of startup companies) or strengthen the company’s management with new appointments (in the case of operating companies) accountable to the Fund. Our experience from small and medium sized companies is that there very seldom exist companies that are not in need of new management if they want to make the leap to the next level.

One of the portfolio companies has developed a business process that allows individuals with very small savings to participate in venture capital investments, in the process creating a perpetual venture capital fund. A technology company has developed an innovative platform that may change the way companies sell their products worldwide. A fintech company we want to invest in is one of the leading finance providers in one of the most lucrative sectors of the commodities markets. Another, an industrial company, is the world’s only manufacturer of frost resistant terracotta, and plans to enter markets in northern Europe and America, where today there are no outdoor terracotta planters because of the cold winter weather. Another company we are looking at has identified never-before-realized economies of scale in production that promise to disrupt a trendy sub-sector of the restaurant industry. 

Our investment philosophy and business ethics are driven by a strong and deep sense of values and ethics honed over many years of career experience. Out of everything that we know and believe in, the most important driver of our thinking and behavior is this:

All companies in all industries depend on and succeed or fail by their people – more than technology or know-how or economics.

To give an example from an industry with a very low rate of innovation that uses uniform technology across the sector, the difference between a successful and a failing steel manufacturer is the people it employs: management and workers.

In another example, the difference between a successful and a mediocre developer of ERP software is the programming ability of its employees. The same is true for every industry.

A company’s management and employees are not “factors of production.” They are the company’s core competence, its competitive advantage. All successful business leaders of the last 50 years, when asked what is their secret of success, they emphasize hiring and people management practices. Even in industries that employ low skilled workers, a key difference between highly valued companies and laggards is their human resources practices. Successful companies offer careers, not jobs. Successful companies treat their employees with respect, not as interchangeable cogs in a machine.

We believe that this is the key to successful management. We intend to approach the portfolio companies on the basis of building excellent management teams and providing employees with a fulfilling work environment that combines fair compensation, job satisfaction, and advancement prospects. We believe that this will be the key to success for our portfolio companies, which will lead to maximum returns for our investors. 

Of course. The investments we intend to make were developed over the last four years, which were years of turmoil globally, mainly due to the pandemic. A number of the companies we intend to invest in have grown considerably larger now, and they have attracted the interest of private and institutional investors who have proposed to some of them to invest in their equity. We are aware of this, as we maintain a very close relationship with these companies, and we provide advice and help in any way we can.

In every case, these companies have refused to accept capital from other sources. In every case, they told us, they want to wait for an investment from us because they only want to move to the future with us. They all understand that an equity investor, especially an investor who buys a significant part of the company’s equity, is really a partner, and partnerships can be tricky things. The companies we intend to invest in trust us to be able and useful partners for years to come. For us, being told that we are preferred partners and to have companies refuse to accept hard cash from anyone else, was a great moment of personal and professional satisfaction. And a validation of our business practices.

The world changed dramatically in 2020. We faced a deadly pandemic, which was mostly created from our careless interaction with our natural environment. Combine this catastrophe with the looming climate change crisis, and it becomes painfully obvious that we are entering a new political, social, and economic era that will change more facets of our lives.

As 2022 rolls in, governments in our investment region seem conscious of and focused on a shift to a more environmentally-conscious future. So, in that respect, we expect the transition to the new era to be a little less dramatic for our portfolio.

Although Canada is making decisions on these matters a lot more like Europe than like the US, the American market remains the biggest single, frictionless market in the world, with off-the-charts consumer spending that helps companies grow fast and big. Despite the turmoil experienced in America throughout 2020, most parties in the US are committed to free market capitalism and traditionally adopt policies to facilitate economic growth. This is an ideal environment for our purposes, and we will watch closely how the situation in America evolves. 

The most obvious effect of the pandemic for us so far has been a reassessment of our intended investments. Our fintech, financial, software, and industrial investments are largely unaffected. Investments in tourism and transportation are out. Investments in restaurant chains will proceed only if they can thrive by emphasizing takeout, delivery, and food truck sales. Investments in consumer retail will have to be re-evaluated. Any technology that relies on online delivery and distribution is in.

Unfortunately, the pandemic will lead us to emphasize automation over employment, and atomized delivery and distribution. One of the hardest hit sectors from this crisis will be commercial real estate, because social distancing will drive down traditional retail revenues and, as a consequence, real estate investment yields. Fortunately, our portfolio companies plan to rent not own, and we have no plans to invest in real estate, in any form.