Marcin Leja, CEO of CVI, joined Giovanni Amodeo for an insightful fireside chat, discussing the evolving landscape of private debt investing in Central and Eastern Europe (CEE). The conversation covered a range of topics, shedding light on macroeconomic trends, demographic challenges, and the growing demand for alternative financing solutions in the region.

Background and Overview of CVI: Marcin Leja began by sharing his professional journey, highlighting his extensive experience in investment banking and management consulting before joining CVI. He described CVI as an independent asset manager specializing in private debt within the CEE region, managing assets worth €1 billion and having invested over €3 billion in local SMEs.

Macroeconomic Trends in CEE: Leja emphasized the robust GDP growth in CEE, particularly in Poland, where the average growth rate has been 3.8% over the past decade, significantly higher than the EU average of 1.8%. This growth has led to a substantial increase in GDP per capita, positioning Poland above 80% of the EU average. He also noted the low penetration of credit in the region, which presents a significant opportunity for alternative financing.

Demographic Challenges: Addressing demographic concerns, Leja acknowledged the influx of Ukrainian refugees into Poland, which temporarily boosted the population. However, he pointed out that long-term demographic trends remain a challenge for the region.

Adoption of Private Credit: Leja discussed the increasing adoption of private credit in CEE, particularly among SMEs. He highlighted CVI’s role in educating the market about private debt through seminars, workshops, and case studies. He noted that while awareness is high in Poland, other countries in the region require further education.

Market Demand and Origination: Leja revealed that CVI receives between 800 and 1,000 investment proposals annually, indicating strong demand for private credit. He explained that CVI focuses on smaller and medium-sized companies, which are often overlooked by traditional banks due to their risk aversion.

Strategic Expansion and Competition: Leja mentioned CVI’s strategic expansion into other countries, including Germany, where they are testing the market with small transactions. He noted that larger Western European private debt providers typically focus on bigger deals, leaving a niche market for CVI.

Future Outlook and Challenges: Looking ahead, Leja expressed optimism about the future of private debt in CEE, despite geopolitical concerns. He highlighted the potential positive impact of post-war reconstruction in Ukraine on the region. He also discussed the challenges of staffing, given the limited pool of experienced private debt professionals in CEE.

Technological Integration: Leja touched on the role of technology, particularly AI, in enhancing CVI’s processes, such as desktop research. However, he emphasized that AI cannot replace the expertise of his team.

Investor Concerns and Fundraising: Leja acknowledged that some investors are hesitant to invest in CEE due to geopolitical risks and the relatively small size of CVI’s funds. He noted the trend of consolidation among both general partners and limited partners, which affects fundraising efforts.

Personal Aspirations: Concluding the chat, Leja shared his personal aspiration to establish CEE as a viable investment destination for large global LPs, aiming to build the largest alternative asset manager in the region.

Key timestamps:

00:07 Introduction to the Fireside Chat
00:42 Background of CVI and Marcin Leja
01:31 Market Overview of Central and Eastern Europe
03:29 Demographic Challenges and Opportunities
06:07 Awareness and Education on Private Debt
09:45 Transaction Origination and Business Model
11:01 Competition in the Private Debt Market
15:28 Future Growth and Market Expansion
18:02 Geopolitical Concerns and Market Impact
19:27 Staffing Challenges and Talent Development
21:36 Investor Concerns and Fundraising Challenges
23:22 Future Aspirations