Secondaries investors don’t often have to factor war and conflict into the operation of the assets they back. For the investors in Ukraine-focused private equity firm Horizon Capital’s debut continuation fund – including ICG Strategic Equity and the European Bank for Reconstruction and Development – the portfolio companies they have exposure to have been conducting business in a country that’s been at full war for the past year and a half.
In April 2021, Kyiv-headquartered Horizon closed a deal to move three assets out of its 2008-vintage Emerging Europe Growth Fund II and into a continuation fund worth $258.3 million.
The EBRD invested $10 million in the continuation fund, according to its website.
Speaking to Secondaries Investor parent company PEI Group staff in London last week, Lenna Koszarny, Horizon’s founding partner and chief executive, said the continuation fund was performing well.
“In 100 days we did a GP-led,” Koszarny said. The fund comprises “80 percent private money” and is delivering “over 15 percent”, she added.
Asked about the operational environment in Ukraine, Koszarny said companies have taken a practical approach. “You have platforms in the country where folks are super dedicated. No one has left.”
Some companies can be “cost-competitive” and benefit from having 100 percent of their revenue coming from outside of Ukraine, Koszarny said. “It’s a natural currency hedge and that’s why they’ve been able to do so well.”
“You have blackouts but you have people who have a Starlink,” she added, referring to SpaceX’s satellite internet constellation. Company staff will “do anything to keep on working and keep on delivering because they feel that it’s their mission to the country”.
Koszarny noted that Horizon is not in any rush to exit its 14 portfolio companies – most of which are recent investments. “We have a plan in terms of exits… I’m more interested in the arbitrage opportunity: that they were invested now, and I would prefer to exit them in a post-war environment.”
Horizon staff continue to monitor their portfolios in the same way other mid-market investors do – with a differentiated approach that can only come from being a private equity firm investing in a war zone.
“We continue to operate business as usual,” she said. “We go to the companies. You hear the air raid sirens, you go into their bomb shelter. You find out if you’re going to a meeting – you might have it at a hotel that has a really good bomb shelter.
“You plan everything around where the bomb shelter is. It’s now a part of life.”
– Carmela Mendoza contributed to this report.
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