North Goes East -- Case Study Case Overview and Important Items

The North Goes East Case documents a decision for the North Asset Management group to diversify the investments that it can offer its clients. One of the ideas that it had was to start a property fund in which the company's clients could invest in real estate through a hedge fund type arrangement. One of the most promising property markets in the world was identified to be in the Central and Eastern Europe (CEE) markets. As countries in this region have been either newly introduced to the European Union or on a path to joining the EU, there has been significant economic growth driven by foreign investment.

Whereas companies in Eastern Europe were growing at a few percentage points in regards to gross domestic product (GDP) per year, many of the countries in Eastern Europe were growing substantially faster. Much of this growth was driven by foreign investment that had entered the previously untapped markets through the trade liberalization deals that were terms of the European Union. However, at the same time, there were still high levels of political instability in the CEE as well as high levels of corruption and other social issues. Therefore, for investors to accept the risks associated with the CEE they...

In the case of North Asset Management, this group set the bar at a twenty percent internal rate of return for their property investments.
Important Case Facts

In May of 2004, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia had joined the EU.

At the time of the case, Romania and Bulgaria were undergoing the application process.

In order to be admitted to the EU, countries had to agree to and abide by many economic and political mandates including such important items as forming a secular democracy as well establishing a market economy.

As a result of the countries embracing capitalism, foreign investment helped fuel a game of "catch up" and these economies grew comparatively quickly on average.

Although the CEE region had tremendous growth opportunities there were still many threats such as labor migration, inflation, political instability, corruption, etc.

SWOT

Strengths

Talented Management

Successful Parent Company

Large Amount of Capital Available

Weaknesses

Limited Experience in CEE

Limited Experience in a Property…