Portfolio Manager in the Land of Investment Funds

Beka Pipia was driven by a strong desire for independent success, which led him to pursue his education and embark on a career outside of Georgia. He chose to establish himself in Luxembourg, where he now manages Threestones’ portfolio, which has a market capitalization of €1.5 billion. Beka Pipia is eager to share his experience with our readers.

You studied abroad and have lived in Luxembourg for many years. Why did you choose Luxembourg over other European countries?

In the early 2000s, my family moved to France, which allowed me and my siblings to receive an international education. After completing my bachelor’s degree in Business Administration from Nottingham Business School in the UK, I pursued higher studies and obtained my MBA and MSF from Boston College in the United States. Later, my wife and I decided to settle in Luxembourg with our three children, attracted by the country’s high quality of life, stable and thriving economy, high GDP per capita, and robust banking and financial services sector. Despite being a small country, Luxembourg is rich in cultural heritage and offers a diverse and multilingual environment with museums, theaters, and festivals.

You have worked for different financial companies in your professional career. What attracted you to this sector?

From my childhood, my father, Roman Pipia, has always been an inspiration to me. Despite facing numerous challenges, he managed to build successful businesses, which is a testament to his determination and constant desire to make a difference in the world. His resilience and drive have always resonated with me, shaping my aspirations and career path.

My goal was to pursue a career in the investment sector, but before that, I wanted to gain experience in sales, negotiations, and project management. Under the mentorship of my father, I started working in companies that would help me broaden my skill set.

I began my career as a corporate banker at Bank of Georgia and then worked for Luxaviation, a private aviation firm, and LCG, a boutique PE(Private Equity) firm. The knowledge and experience I gained while working in Luxembourg allowed me to quickly develop my career in the investment sector.

You now work for the alternative investment fund Threestones Capital Management S.A. as Head of Portfolio Management. What can you tell us about this company? What is an alternative investment fund, and in which sectors does it operate?

Threestones Capital is an independent investment management group based in Luxembourg that manages private capital in accordance with the requirements established by the Financial Sector Supervisory Commission of Luxembourg (CSSF). The company has a current market capitalization of approximately €1.5 billion and primarily invests in healthcare and real estate assets, with a focus on nursing homes and specialized healthcare. We invest the funds raised from our investors and aim to deliver profits every six to eight years. Our first portfolio generated a 13% profit, and the second portfolio yielded a similar outcome. The current portfolio is invested in multiple countries concurrently, marking the first time we have undertaken such geographic diversification. We are currently in a fundraising phase, which presents both a challenging and interesting opportunity for our team.

Which investment model do you use for nursing homes? What are its advantages and risks?

Threestones’ primary strategy is to purchase real estate properties and lease them to large operators for a duration of 20-25 years. The lease agreements are designed to be inflation-proof, ensuring maximum returns on investment. The company specializes in investing in smaller towns, where demand exceeds supply, and the locations are strategically attractive.

The value of the investment lies not only in the real estate but also in the lease agreement, which is supported by various pension schemes and insurance policies. Threestones has many years of experience and extensive knowledge of the market, allowing us to make high profit margins on structured transactions. Although the business model is stable, the operators themselves are not entirely immune to wage increases, energy costs, and hyperinflationary fluctuations. Additionally, a potential risk factor is the lack of professional staff.

Is it possible to apply this model to Georgia?

Georgia shares similar demographic trends with many Western European countries, making it favorable for the nursing home business model. While traditionally, Georgians have not favored sending elderly family members to nursing homes, this attitude is gradually changing. With the increasing prevalence of conditions such as dementia and Parkinson’s disease among the elderly, it can be difficult for family members to provide adequate care. Nursing homes employ specialized personnel and offer ideal conditions to care for such patients. These facilities are designed to provide a homely environment rather than a clinical one.

For this business model to succeed, Georgian legislation must be modified to ensure that everyone has access to healthcare. Medical services and health coverage should be made available to vulnerable individuals by the state, while private insurance should provide reimbursement for privately insured individuals.

What else is in the company’s portfolio?

Besides healthcare, Threestones invests in the residential sector, purchasing buildings and leasing individual units. We focus on towns where there is a large demand from universities and manufacturers. We recently began investing in business operations and are trying to obtain a license to adapt to current market demands.

Luxembourg is a key global financial center. It is the world’s second-largest center for investment funds after the United States. What is the situation in Georgia in this regard? How successful are the investment funds in our country, and what problems do they encounter?

Georgia’s strong financial sector and advantageous location make it a prime candidate for becoming a regional hub for investment funds. By implementing new regulations and tax policies that foster a business-friendly environment, Georgia can follow in the footsteps of Luxembourg’s successful model from two decades ago. This will not only boost the investment fund industry in Georgia, but also attract regulated funds from neighboring countries.

What are the global trends in the investment sector? What has changed as a result of the sanctions placed on Russia?

Institutional real estate investors continue to grapple with a cost-of-capital crisis compounded by a challenging economic outlook and growing ESG pressures. Industry leaders continue to weather the geopolitical storm, with the added burden of inflationary pressures. There are a number of trends that clearly emerged from the results: interest rate movements, political instability and market liquidity.

Threestones has no business dealings with Russia whatsoever. However, the economic sanctions have led to a significant increase in energy prices, which has impacted the revenues of our operators. To account for these unforeseen circumstances, we have introduced new stress tests in our business model. Despite these challenges, the EU has managed to handle the situation remarkably well, overcoming a problem that was once thought to be insurmountable.

You mentioned earlier that you worked for Bank of Georgia for a while. How does the Georgian banking sector differ from its Luxembourgish counterpart?

Luxembourg is the largest investment hub in Europe, with over 3,600 investment funds and 120 international banks that offer classical banking services. Georgian banks offer more advanced and versatile digital services to their consumers. However, banks in Luxembourg do not operate in industries other than banking.

Georgian banks have expanded their scope of activity consequently creating barriers to entry for new players. Georgia can attract institutional funds by adopting Alternative Investment Fund Management regulations. This would increase competition and bring liquidity to the market for new regional projects.

How can Georgia benefit from EU candidate status?

I’ll give you an example. Our company was in need of IT professionals to upgrade our website, and we were searching for such professionals in Georgia. However, the process was quite complicated and lengthy due to Georgia not being a member of the EU. Once Georgia joins the EU, it will simplify processes like this as Georgian and European legislation will be harmonized.

I am optimistic that Georgia will soon become a member of the European Union. This would provide the country with greater access to funds from major financial institutions, thereby boosting its economic growth for years to come. Most importantly, it would lead to an improvement in the country’s security and the rule of law.

Let us talk about the Hyatt Regency Tbilisi hotel. You started working on this project many years ago, and there were plans to open the hotel in 2017. Why was this process delayed, and at what stage is the project now?

In 2013, we purchased a building intending to turn it into a hotel. However, the project was put on hold in light of certain political and economic challenges. We have recently completed the renovation work with new partners and are hoping to open the hotel in the next two to three years. The total investment in the project is around $80 million. The building is unique due to its historical heritage and architectural significance. Once completed, the hotel will be the jewel of the city, offering customers exceptional quality services in the hospitality industry.

What are your plans for Georgia? Have you considered returning and continuing your work here?

My family and I have settled in Luxembourg and do not consider moving elsewhere anytime soon. Georgia will always be our home, and we ensure that our children visit often, speak the language fluently and are proud of their origins, representing Georgia in their school fairs and international activities around Luxembourg. Additionally, my wife and I are involved in organizations and business activities aimed at promoting Georgia and Georgian products abroad. The experience I have gained at Threestones Capital has been tremendous for my career growth, as my future plans have always been to open an investment fund with my family, which will focus on Georgia, among other European countries.

Photos Credit to Oksana Starikova

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