Augmentum Fintech (LON:AUGM) is a new London-listed investment company that was created to profit from opportunities in the UK and European Fintech sector. It will concentrate on businesses with innovative technologies that have the power to change the way we conduct our financial affairs and will distribute 50% of the realised gains made each year.
AUGM will invest in early or later stage private Fintech businesses that are high growth, with scalable opportunities, and that have disruptive technologies in the banking, insurance and asset management sectors, as well as other cross-industry propositions.
The company began trading in March after raising £94 million via its IPO and has invested around a third of the money in a seed portfolio of five businesses. Once the capital has been fully deployed it will have stakes in 15 to 20 different holdings.
Its largest investment is a 7.4% shareholding in Zopa, a well-established peer-to-peer lending platform. Since it was created in 2005, Zopa has lent more than £3 billion to UK customers and it is currently in the process of launching a bank with its banking licence expected to be granted this year.
Another key holding is the 11% shareholding in BullionVault, which is a retail precious metals investment and trading platform. This was established in 2005 and has around 70,000 users with approximately $2 billion of stored bullion.
These are both substantial businesses, as is Interactive Investor, the country’s second largest online broker after Hargreaves Lansdown. It was set up in 1995 and has about £20 billion in assets under administration with AUGM having a 4% stake.
Zopa and Interactive Investors both have a projected exit date of 2021 with the plan being to distribute 50% of the realised gains each year, either through share buybacks, tender offers or special dividends. There is also the additional safeguard that if the NAV falls below 70p (it is currently 100p), new investments will be suspended and shareholders consulted about the future of the fund.
The senior management team of Tim Levene, Richard Matthews and Perry Blacher, have extensive experience of investing in and founding Fintech companies. This includes putting together the initial seed portfolio back in 2010 and they now have extensive shareholdings in the new company.
The team have a large network of industry contacts and have identified a pipeline of new opportunities valued at £150 million. It is likely that the fund will be fully invested within about 12 months, with each new deal typically being in the range of £2 million to £6 million. These holdings will be actively managed with a view to positively influencing any future financing rounds and the eventual exits.
These sorts of unlisted Fintech businesses are high risk, but have the scope to generate exceptional returns. It is early days, so it will be interesting to see how the remaining capital is deployed and the level of performance that the fund can achieve, while bearing in mind that the portfolio will only be formally revalued twice a year. It is definitely one to watch if you are looking for a high growth investment.