5E Makes Rapid Progress, Mulls Capital Increase

5E Holding, the quoted fund-of-funds specialising in Central and Eastern Europe that Vontobel Group launched in 1998 (EVCJ August/September 1998, page 5), committed a total of CHFr 72.9 million to four new funds before the year end.

Vontobel Group originally hoped to raise between CHFr 250 million and CHFr 350 million (euro 155 million-euro 220 million) for 5E Holding, but the late summer launch of the fund coincided with the Russian economic crisis, which had a knock-on effect on the stock markets in Central and Eastern Europe. Despite the fact that 5E Holding’s investment strategy is slanted towards the Central European markets, which are now more closely linked to the Western European economies than to Russia, investor appetite for the fund-of-funds was limited, and 5E Holding’s private placement raised just CHFr 100 million.

A spokesman for 5E Holding said the firm is currently considering the possibility of a capital increase for the fund during the course of this year “depending on how we proceed with future commitments”.

Another Vontobel Group vehicle, 5E Small Cap, benefited from a CHFr 20 million commitment from 5E Holding. Although private equity funds are its principal target, 5E Holding includes small-cap stocks in its investment remit because the extreme illiquidity of the small-cap market in Central & Eastern Europe means that such stocks share many of the characteristics of conventional unquoted company investments.

5E committed CHFr 16.5 million to the $50 million (euro 45 million) Hungarian Equity Partners Fund. Managed by MAVA Investment Management, the successor organisation to the Hungarian American Enterprise Fund, Hungarian Equity Partners focuses on development capital and buyouts in Hungary.

The two other funds backed by 5E Holding, Innova Capital 98 and Baring Communications Equity Emerging Europe, both have a regional remit.

Innova Capital 98, Innova Capital’s second fund, raised $121 million for investment in consumer goods and other consumer-dependent industries in the region, with an emphasis on Poland. 5E Holding committed CHFr 18.5 million to the vehicle.

Baring Communications Equity (Emerging Europe), which received a CHFr 17.9 million commitment from 5E Holding, focuses on the telecommunications and media sectors throughout the region.