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Finles targets €100m fundraise through cryptocurrency launch

The firm aims to secure a 25% IRR by investing almost one-third of Finles Lowestoft Equities Fund in high-growth blockchain companies.

Finles Capital Management, a Netherlands-based fund manager, wants to raise €100 million for a €500 million private equity fund by issuing its own cryptocurrency.

The firm will issue a finite number of digital tokens, or FundCoins, to retail investors in an initial coin offering on 30 August, according to a statement. The majority of proceeds will be invested in Finles Lowestoft Equities Fund, a 2013-vintage arbitrage fund that has been dormant for several years and will be renewed as a €500 million private equity and traditional investment vehicle, chief investment officer Rob van Kuijk told Private Equity International.

The fund, which is expected to hold a first close in October, is targeting a 25 percent gross internal rate of return by allocating 30 percent of its capital to high-growth blockchain companies, in addition to venture capital and alternative strategy fund investments, according to the statement. The fund has already committed to more than €200 million of private equity investments across 14 transactions, with a further 50 in the second or later stage of investigation, according to its 2016 annual report.

FundCoin, which will back backed by the fund's private equity investments, will be tradable on the secondary market, making the investment more liquid than traditional private equity, the statement noted. The remaining €400 million will be sourced from traditional private equity investors up to two years after the ICO, van Kuijk said.

“Not only does [FundCoin] use blockchain technology to open up access to retail and cryptocurrency buyers, it solely invests in a fund that is run by professional managers and so linked to the structure that provides a more safe harbour in the highly volatile blockchain market,” van Kuijk added in the statement.

Blockchain is a form of distributed ledger technology which uses chunks of data to form a continuous shared information chain. Each block references the previous one, meaning the information cannot be altered retroactively without impacting the entire chain. The technology is most commonly used for tracking money transfers, with notable examples including the Bitcoin and Ether cryptocurrencies.

The blockchain market is expected to have a 58 percent compound annual growth rate over the next six years, according to Allied Market Research. Technology investments have on average sold for an enterprise value of 11.14x EBITDA since the recession, compared with a median sale price of 9.67x EBITDA for non-tech deals, PEI reported in early August.

Finles Capital Management has €500 million of assets under management, according to the statement.