[for German, please see attached]
I am excited to announce that iolite Capital has been selected by Electa Value Capital Fund, a newly created fund of funds headquartered in Liechtenstein, as one of their key investment partners. Electa has a strong value proposition, as it directs capital to overlooked sectors of the market. In times when most fund flows are directed towards index funds, companies not in the index are not on the radar for most investors. This is not the case with the capital allocated to the managers picked by Electa. If you are looking to invest in a basket of distinguished and differentiated managers, this could be a very interesting opportunity.
I look forward to this exciting collaboration and the success it promises for both Electa and iolite.
Please find their first investor letter attached. Here is what they have to say about iolite:
Robert Leitz and Iolite Capital
In this letter, we would like to introduce Robert Leitz and Iolite Partners Ltd. Currently, around 10% of our capital is invested in this fund. Before we present our "investment thesis," we would like to provide more details about the fund advisor's background.
Robert Leitz began his career after completing a Master's degree at the University of St. Gallen (HSG) in the restructuring sector. In this role, he advised companies across Europe that were going through financially difficult times and worked with managers to steer these companies back onto a more stable path. Even in this early stage of his career, Robert adopted an "investor's mindset." Often, the creditors of these companies were investors or banks aiming for a full takeover of the companies by converting debt into equity. These experiences also led to his position at Goldman Sachs, which gave him an opportunity to shift to the creditor side. He continued with this investment style for two years at Castlelake, a private equity and credit manager.
When the financial sector in London entered turbulent times around 2008, Robert Leitz returned to Switzerland, where he gained further industry experience working in the finance departments of two international corporations. For three years, Robert Leitz served as the Head of Controlling for Germany and Switzerland at Weleda AG, a natural cosmetics manufacturer. Additionally, he gained experience in the commodities sector during his five years at Glencore, a leading company in raw material extraction and trading. This experience is still reflected in his investment style today. During this period, Robert also founded Iolite Capital Management AG and began building his track record in the public equities sector.
Our investment in Iolite is based on three main reasons. First, we have been in contact with Robert Leitz for a long time. Members of our team have met Robert Leitz at numerous investor conferences. Through these exchanges and by reading his investor letters, we have come to understand that Robert Leitz advises the Iolite Fund based on the same principles we uphold in our company and investment style.
Second, Robert focuses his investments primarily on areas and market segments that we, due to different competencies or the size of the companies, do not typically address. Iolite maintains a concentrated portfolio (about 10 companies) and primarily invests in smaller companies/small caps. Moreover, there is a focus on partnerships with entrepreneurial managers who have significant stakes in the companies they manage. This is where Iolite excels, as managers who prioritize operational success have Robert Leitz as an experienced financial advisor and co-owner. Lastly, Iolite is also heavily involved in the commodities sector, a segment that we traditionally cover less. This provides diversification for our investors.
Finally, Iolite has an impressive and long track record. Combined with the investor letters and the consistent adherence to its investment style, we believe that an investment in Iolite is an attractive opportunity.
One of Iolite’s current investments is Dynacor Group Inc. The company focuses on sourcing and processing gold ore from small mines in South America. These small suppliers contribute significantly to global gold production (~25%). However, many of these mines face challenges regarding unethical practices and illegal mining. Dynacor only purchases from state-licensed suppliers and adheres to strict ethical and social guidelines. The gold is then sold to the luxury industry and as ethically sourced gold to banks. This certification allows Dynacor to sell its gold at a price higher than the market rate. The surplus is invested in a foundation that promotes social progress in the home regions of the suppliers. Over the past years, Dynacor has seen strong growth in both revenue and earnings and has plans to further expand operations. Currently, Dynacor is working on various expansion projects in South America and Africa, with the goal of at least doubling gold production in the near future.
Dynacor’s management team is also invested in the company and is focused on creating value for shareholders. This is evident in their dynamic share buyback and dividend distribution policies, which do not limit sensible growth investments. At the time of this letter, Iolite holds approximately 10% of the outstanding shares and is the largest shareholder.
On the surface, Dynacor may not be an attractive investment for many investors. Its small market capitalization, low trading volume, and operations in South America make it unattractive or even uninvestable for many institutional investors. However, for smaller funds like Iolite, this is not a disadvantage, as the market’s valuation of the company is significantly lower than that of more well-known and larger stocks. In our last conversation with Robert Leitz, we were impressed by his knowledge of the company, which extends far beyond the financial figures, as Robert personally traveled to Peru to visit the facilities.
In our view, Dynacor exemplifies Iolite’s investment style and demonstrates that Robert Leitz is a dedicated value investor who enjoys thoroughly analyzing his investments, giving us full confidence in his decisions.
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