As scrutiny deepens into the contentious dealings surrounding the Hungarian National Bank (MNB) foundations, it has become increasingly clear that significant losses have been incurred, primarily affecting the Hungarian public and institutions like the Neumann János University in Kecskemét. It appears that some individuals have substantially benefitted from this situation, notably the circle surrounding Ádám Matolcsy, while others, such as MBH Bank, may evade accountability due to their cautious lending practices secured with robust collateral.

However, a closer inspection reveals that a major portion of the estimated HUF 200 billion loss attributed to MNB foundation investments stems from two overseas real estate ventures, rather than deliberate misappropriations.

The loss in wealth predominantly derives from poor management decisions.

Particularly, the MNB foundations, which manage a substantial portfolio, miscalculated the repercussions of acquiring a majority stake in Polish GTC SA, a prominent stock market company.

Despite favorable performance in stock markets during the timeframe of the investment, the decision to acquire a controlling interest in GTC SA marked the beginning of substantial depreciation.

In April 2020, the MNB foundations committed to purchasing a 61.5% majority stake in GTC SA from the Texas-based Lone Star Funds, an entity managing approximately $100 billion in assets.

During negotiations, which commenced prior to the outbreak of COVID-19, the average market price for GTC shares was reported at 6.86 zloty.

The MNB foundations purchased the shares at 9 zloty, thereby overpaying by approximately 31%, resulting in an excess of nearly HUF 60 billion.

Subsequent assessments revealed a sharp decline in the share price, falling to 4 zloty at the conclusion of the audit, and further down to just 3.9 zloty currently.

The investment oversights occurred during a time when the COVID-19 pandemic began to reshape the global market landscape.

The swift transition to remote working saw the office market stagnate, undermining the value of GTC's assets.

Concurrently, internal organizational challenges exacerbated the situation.

The original management team faced difficulties maintaining relationships with international investors and creditors, further driving down the company’s stock value.

In 2021, GTC issued green euro bonds valued at €500 million, boasting noted arrangers such as JP Morgan and Morgan Stanley, at a competitive interest rate of 2.25%.

However, the subsequently perceived connection between the MNB foundations and the Hungarian state compromised GTC's reputation among investors.

High-profile departures from the company exacerbated the situation, as subsequent leadership struggled to reassure stakeholders regarding the company’s governance.

Furthermore, the GTC share price plummeted, leading to an estimated HUF 150 billion in direct losses attributed to this venture.

Although the management’s strategy in further investments appeared initially promising, deteriorating investor confidence and managerial turnover contributed to a substantial depreciation of the asset.

The second significant investment involved Ultima Capital S.A., focusing on luxury real estate in desirable locations such as Gstaad.

The MNB foundations anticipated that the exclusivity and enduring demand for high-end properties would yield profits, particularly as the market for luxury real estate remained robust.

Initial projections indicated a buy-in price of 110.12 Swiss francs per share, which diminished to 88 francs upon review, translating to a 20% reduction in value.

Collectively, these two investments account for the reported HUF 200 billion loss attributable to the MNB foundations’ portfolio.

A broader analysis revealed that had these funds been allocated differently, such as being remitted to the national budget, they could have significantly altered Hungary's fiscal landscape, potentially alleviating national debt through direct investments into the state treasury.

In addition to these losses, significant foreign capital arrangements were also made to support the undertakings, with HUF 200 billion additional debt taken on, which compounded the situation.

Despite these financial mishaps, MBH Bank maintained its secure position, having structured its loans to ensure minimal risk exposure, including the acquisition of collateral on various assets held by the foundations.

The interplay of these financial dealings continues to shape the broader narrative surrounding the MNB foundations' investments and their implications for Hungarian public funds.