Vytautas Plunksnis. Moldova has the highest potential for investment in Europe

Hello, Mr. Plunksnis. Would you mind if I ask straight away about figures? Lithuania, with its population of about 2.8 million people, is very close in size to Moldova. I am trying to imagine a financial institution in Moldova that would manage 1.5 billion euros and would have over 200 thousand clients. Therefore, my first question concerns the structure of your fund: what are the main sources of funds? Or is it secret information?

Of course not, we have been a public company for more than a quarter of a century, since our shares were traded on the stock exchange. Out of 1.5 billion euros - 1.1 billion is pension funds.

Unfortunately, pension funds are by no means a Moldovan practice.

In the Baltics, however, they have long been a reliable tool for the population to prepare themselves for the retirement age. As a company that manages these funds, this imposes a number of certain restrictions on us. When dealing with pension funds' money, one should choose the least risky investments.

1.5 minus 1.1 - leaves "only" 400 million. What is the "geography" of these funds? Sooner or later Moldova will follow the path of the Baltic countries, and I wonder who has already entrusted 400 million euros to post-Soviet countries?

The largest "ticket" out of these 400 million is 30 million from a subsidiary of the European Investment Bank. It is a very important partner for us, as it proves our reliability to European institutions. Frankly speaking, although Lithuania has been an EU member since 2004, in negotiations with European investors we still have to explain to everybody that the Baltic States are a reliable region for investments.

There are the cards, both Moldova and the Baltics, have been handed out from the past. Nevertheless, these are the terms of the game and we should simply move forward. Though, judging by the numbers, you're doing very well. Did you manage to attract such resources as pension funds right away?

Invalda was founded in 1991; last year we celebrated our 30th anniversary. However pension funds were established in Lithuania only in 2004 and for a long time they had little money. In addition, there is one important subtlety in the activities of companies like ours - it takes time to convince institutional investors, one needs a "track record" and experience. "Show me what you've done in the past, and then I'll invest in you." You show a presentation, prove you're a good investor, but the answer is usually the same: "Make money first."

It's almost a vicious circle. I think that Moldova, sooner or later, will have large investment companies of its own, such as Invalda. What advice would you give them on how to take the first steps and gain the trust of major investors?

I can tell you about our experience. Obviously, it is not universal, but in our case it turned out to be effective. For a long time we worked as investors from our balance sheet and from our shareholders' money. Creating partnerships was our strong side. We still stick to it. By the way, this was also the case with maib. It was our first major investment outside the Baltics, and we accepted it because we had received an interesting proposal from reliable partners.

Tell us more. Everything that concerns Moldova in your business is particularly interesting.

We were invited to the maib partnership by the EBRD. We had previous experience working together with a Lithuanian bank, and then, one day, they approached us with a proposal: "We are considering investing in a bank in Moldova, there is a second partner Horizon Capital - they were already linked to Moldova as Purcari and Glass Container Company investors - would you like to join as a third partner and share the profits and risks?"

Was that 2018?

In 2018, we have already invested in maib. Our first encounter was in 2016. Investments of this scale are not made in a day. We worked on the project for two years. In the end, a consortium was created, which now owns 41% in the share capital of maib. Invalda structures, in their turn, own 37.5% in this consortium.

That means you are not majority shareholders?

We are major shareholders, but not majority ones. Our goals are the same as those of the other shareholders. The main objective is to develop the bank and meet the needs of its clients. If the clients are happy, the bank's team will prosper, and we, as shareholders, will be happy.

It turns out that as the Chairman of the maib Council you are one of the participants involved in the negotiation process of management and not the ultimate truth?

Yes. Reaching consensus is Invalda's historical management culture. The company was founded by 12 people from academia. Invalda has never had a shareholder who had a controlling interest and sole decision-making power. We always made decisions by consensus. This philosophy has also become the basis of our investment practices. As a fund, we are far from always seeking to have a controlling interest in a particular business. Yes, there are cases where we invested 100% of the capital, but there are also investments where we only own 48 or even 33% of the capital. Working in such conditions teaches flexibility and finding a resolution vector that satisfies all shareholders.

Was the goal to take maib to an IPO set immediately?

Later on. Georgy Shagidze is the most important driving force here. He has already had experience of bringing the bank to an IPO and is an example of a manager clearly focused on success and on concrete results. It is clear that the launch of Moldovan bank's IPO is a grand and ambitious task. Moreover, it will change not only the life of the bank. It will be a success for the Moldovan economy as well, because international recognition of the stability of a leading banking institution on the market implies indirect recognition of the stability of the national economy. Such success will undoubtedly open doors for other investors to Moldova as well.

Did Invalda have successful "exits" to IPO in practice?

We have a lot of experience with the stock exchanges - today we have 4 listed companies. Don't forget that our own shares have been listed on the NASDAQ Baltic Stock Exchange since 1995. And during that time, their value has increased by 150 times.

Not bad! If I had invested $10,000 in Invalda in 1995, I would now have $1.5 million. Too bad no time machine has been invented yet...

Well, that's if we're talking about our performance. The most successful investment was in pharmaceuticals. At that time, a plant in Lithuania went to an IPO and raised money for buying a plant in Poland, which had bought the company we had invested in before. At the time it was a 365 million euro deal where we had a 25% stake.

By the way, how diversified is your portfolio of investments by country and industry? Do you have any investments in my favorite IT sector?

The Baltics, where most of our investments are concentrated, is a small region. Thus, choosing one, narrow niche for investment here is both impossible and irrational. That's why we invest in a wide range of sectors, from waste recycling and plastic to the IT companies you are asking about. With regard to IT, we strive to invest in such companies that have their "brains" in the Baltics and provide services to those countries that are commonly referred to as emerging & frontier markets.

Is maib​ a novel experiment for you then?

Absolutely. This is our biggest investment outside the Baltic States, so it deserves special attention.

Vytautas, I got so carried away with questions about Invalda and maib that I haven't asked you any personal questions yet. When did you start working for Invalda? Was it after 1991?

Sure. I only received my bachelor's degree from Kaunas University in 2000. Since 1999, I worked as an analyst at a brokerage company. Then, here you may be surprised, but you and I are fellow writers. I got an offer to become a journalist and worked for three years in a Lithuanian news agency. Later I became the editor of the business department. It was one of the most interesting jobs I've done in my life. Since then, I always read news and public information "differently." Habit is habit.

What about Invalda?

I joined Invalda in 2006 and I had worked, probably, in every position in the company, starting as a financial analyst. I'm a case study for the openness and the opportunity of building any career in our company. The result will only depend on your abilities.

I checked the website for the list of companies where you are on the Board. There are over ten of them. Tell me the secret of time-management, how do you manage to do everything?

I still have to improve my time-management. When you spend 12 hours at work, your family doesn't praise you for it. But there's no other way around. When you're on a supervisory board, and specifically when you run it, you have to be ready for phone calls at any time of the day or night. Nevertheless, you have to concentrate. Now most of my time is devoted to two companies - maib and Eco Baltia - that garbage and plastic recycling plant I was talking about.

Do you visit Moldova often?

Prior to COVID, at least once a month. And now, again, I'm here every month.

Considering how much we have talked about "official matters", I would like to switch to informal communication. What is your favorite Moldovan wine?

And what do you think, given that I am in constant communication with Vasili Tofan from Horizon Capital?

I suppose, given that he'll probably read this interview, you' ll say, "Purcari"?

Well, you answered that for me. In fact, Purcari wines are indeed excellent. However, I didn't limit myself only to them. There are many very interesting small wineries that produce wines with character. My opinion is that you, in Moldova, underestimate the tourist potential of the Cricova cellars. These dungeons could well become a gem of international tourism. Unfortunately, I often hear from Moldovans pessimistic opinions about their country. But this is an insider's view. Believe me, we would never invest money in the business of a country where things are bad. It seems to me that you have to become real "salesmen" for your country. Praise it and be proud of its potential. It is indeed great in Moldova. I can tell you this as an investor with experience.

You think so?

Don't be surprised, but we at Invalda believe that Moldova has the highest investment potential in Europe. Yes, one of the reasons for that is the "low base." But if you draw a line and get the development vector right, the low base is exactly what investors are looking for. At the end of the day - our goal is to get the maximum return on investment.

How do you draw the line? What should the vector be?

The first is the rule of law. The law is the law, a contract is a contract. For the foreign investor, corruption is a dangerous factor of uncertainty in a foreign market. We all want to work by the known rules of the game.

OK. The law and the anti-corruption measures. What else?

Education and the right attitude towards the diaspora.

Everything is clear with education. However, the exodus of people from the country is a real trouble.

You know, in Lithuania, if I am not mistaken, only 2020 was a positive year in terms of the balance of migration, when more people returned than left the country. There are positive aspects to emigration. Your citizens gain the most important thing there - experience and knowledge. Believe me, as soon as Moldova starts showing positive results in economy, some of them will come back to do business here. And do it with new experience and knowledge.

You are an optimist.

I am an investor, which means I try to see the most objective image possible.

Then one last question. Where does Vytautas Plunksnis invest his personal money?

Do you know what the main postulate of our company is? You cannot risk other people's money if you do not risk your own. That's why almost all of my investments are in the capital of Invalda INVL and in the products that we manage.