TBILISI, Georgia - A small group of Western direct equity specialists is about to launch the first-ever fund investing in Georgia.
Robert Medearis, president of the Caucasus Fund, believes there's huge, untapped potential in the region, which formerly was the bread basket of the Soviet Union. He hopes to raise $100 million for the new fund, which will be launched July 15.
Tucked away near the right-hand corner of the Black Sea, Georgia was the subject of a bitter ethnic conflict that culminated in the creation of an independent parliament in October 1992.
Since then, however, the economy has bounced back, Mr. Medearis observed, helped in part by a new pipeline that is due to be completed some time next year that will bring oil from Baku on the Caspian Sea across to the Black Sea.
In addition, new legal codes governing ownership rights are now in place, many of the state-owned assets have been privatized and the work force is highly educated, he said.
The new fund, which also will invest in Armenia and Azerbaijan, will take direct equity investments in small and midsized companies mainly engaged in agriculture, high-tech industry, light manufacturing and tourism. At a later stage, Mr. Medearis added, the fund might start investing in Georgian banks.
Suitable companies will be allied with Western strategic partners, who will provide technical expertise, and then monitored by locally based fund personnel.
Mr. Medearis has powerful friends to help him get the Caucasus Fund off the ground. Georgian President Eduard Shevardnadze has given the fund his blessing; former U.S. Secretary of State George Shultz will sit on the fund's advisory board.
Furthermore, Leonard S. Chaikind, a former administrator of the Shell Oil Savings and Retirement Program and who now runs Institutional Investors Consulting Co. in Houston, is marketing the fund. He intends to drum up between $10 million and $15 million by Sept. 30. He hopes to raise $50 million in commitments by the end of this year and close the fund with $100 million at the end of June 1998. Once the money is raised, Mr. Chaikind will become a member of the fund's board and investment committee.
Mr. Chaikind is targeting high-net-worth individuals, institutions and foundations in both the United States and Europe. "Investors will trust me. They're people I know," he said.
The European Bank for Reconstruction and Development in London already has agreed in principle to invest up to $5 million in the new fund. Also, the Washington-based Overseas Private Insurance Corp. has expressed an interest in providing a loan to the fund.
The fund will be established as a limited company based in Delaware and will charge an annual management fee of 2.5%, although Mr. Chaikind, who's helping develop the fund's structure, hopes to reduce this figure to 2%. "I want to make sure it's everything I wanted as an investor at Shell Pension Funds," he said.
If the Caucasus Fund proves to be a success, Mr. Medearis has plans to launch other funds in the region, starting with one in Kazakhstan.