Investing: where do Lithuanian millionaires put their money?

“Unlike the countries of old Europe, where the inheritance of half a millionaire was inherited, the absolute majority of the richest Lithuanians earned it in their established businesses and only in recent years has it started to move away from direct corporate management. Some sell businesses or parts of businesses to expansive-minded competitors or relinquish control to children. In recent years, we have seen more and more that companies are actively bought by professional managers: private equity funds, ”says Alius Jakubėlis, director of Orion Securities.

According to the report, financiers also see changing trends when talking about where the wealthiest Lithuanians invest their money: investing with partners in real estate or lending money to other entrepreneurs at a significant interest rate is replaced by investments in private equity funds and active community. the projects are complemented with intangible capital, scientific and academic foundations.

Today, the standard investment of the richest (a trading ticket) in a financial instrument is one million euros, but increasingly, these transactions add up to 5 or 10 million. euros.

My favorite Lithuanian investment is real estate.

“20 or even 10 years ago, it was common for entrepreneurs to reinvest all the money they made in developing their business. Sometimes they didn’t even have their own houses, all the money went to the one business. This was a growth stage, without which we would not have strong international Lithuanian companies competing successfully in the global market today, ”says A. Jakubėlis.

And those who did not need to invest all their funds in business generally opted for their favorite Lithuanian investment: real estate, as an alternative.

“Apparently psychology works here,” says A. Jakubėlis. – The properties are tangible, visible and give a feeling of security. This offsets those disadvantages: complex liquidity or additional liabilities for the bank, which often fall on the shoulders of the core business. “

It was customary to invest in real estate alone or with joint owners of companies.

“This is how many complex business groups appeared, where you could not immediately know which is the main and which is the secondary. In recent years, we have seen cases in which this separation was carried out in such a way by inheriting or selling part of the property, for one property, for another, the main business, ”says A. Jakubėlis.

The second most popular investment in a long time was lending money to fellow entrepreneurs, generating significant returns and the same considerable headaches.

“The credit conditions for banks to do business in Lithuania have never been very favorable, so they often had to seek money for business development or even working capital from other entrepreneurs. It can be said that a kind of alternative financing system worked. However, the joy of many stakeholders was overwhelmed by the fact that borrowers were not always able to meet their obligations, and then a difficult process began, at the end of which it was not always recovered, but inevitably discovered to the enemies, ”says the head of Orion.

3 lessons learned during the crisis

According to the interviewee, the changes in the investment habits of the richest people in the country occurred 5-6 years ago and were largely related to the lessons learned in 2008-2009. lessons from the crisis.

“It took time and effort to recover from the financial crisis, and the 3 most important lessons were evaluated after the recovery,” says A. Jakubėlis.

The first is that putting everything together in a successful business increases risk, so investments must be diversified.

The second is that when you manage everything yourself, there is not enough time in the day. The additional investment consumes you so much that there is no longer enough for the core business. Therefore, the investment did not start with friends or long-term business partners, but with those who have experience in a new business segment. Financial investors and those starting a new business have parted ways.

The third is investing is also a job that I prefer to entrust to professionals. Thus, initially, people supervised investments within companies and, as the need for new skills grew, the first Family Offices appeared, monitoring the assets of one or more entrepreneurs. An alternative solution, chosen by a regular entrepreneur among the 500 richest people in the country, is to invest through various funds.

“The crisis has had not only financial but also psychological consequences. The search for big, fast and risky money has been replaced by the desire to first preserve existing assets, to divide investments wisely. Other objectives are set for investment. : It is no longer necessary to obtain a majority stake in each object or necessarily participate in its management. In general, many of the wealthiest people, those who have been building their businesses for 30 years, are gradually withdrawing from active participation in the operational management. Many of their companies are managed by hired directors, in others leadership positions are gradually filled by children, “says A. Jakubėlis.

A new generation of “digital millionaires” is emerging

There is also a new generation of “digital millionaires”: young people under 40 who find themselves in the ranks of digital IT or the so-called fintech business. Also young people who unexpectedly made money with a wave of cryptocurrencies.

“Their investment habits are more aggressive, more focused on an area they know well: digital services. They make decisions faster, they tend to play in global markets, they follow a much greater amount of information, they have a good command of foreign languages. They are as many of the richest were 20 years ago: determined to take risks and not experience the consequences of the crisis “, describes A. Jakubėlis to the new generation.

It is the young generation that tends to create and develop new business ideas (Start ups). Nowadays, it is not difficult to attract the necessary financing for those who want to develop a new business idea, because these companies are aimed both at wealthy entrepreneurs and specialized investment funds of new creation. In general, investors are more inclined to seek new alternatives and seek IPOs of global companies or seek opportunities to invest in unlisted companies such as Space X, Revolut or Robinhood.

Don’t invest one by one and not just for profit

“The sharing economy has permeated the habits of the wealthiest,” he said, noting that group agreements, so-called “club agreements,” were becoming dominant. And not only when it comes to investing for your own benefit. Today, a successful investment strategy is usually associated with support, and the most suitable scientific-academic sector is for that.

Entrepreneur Marius Jakulis Jason founded 3.5 million. MJJ fund worth 10%. Each year, Values ​​is dedicated to providing financial support to talented business developers, academics and students who can and want to contribute to the growth of the Lithuanian economy.

The Intangible Capital Foundation of Vilnius University operates on a similar principle. To date, more than 700 people have already donated money to him, and the fund is worth more than $ 2 million. euros. The investment performance of the fund is allocated to the needs of Vilnius University.

“This is a great start and we will only see more initiatives of this type in the future. I wish you a successful investment and patience, because it is necessary to invest,” says A.Jakubėlis.