Bridging the gap: VC firm deploys AMC structure to fund activities

Swiss Venture Capitalist CV VC has partnered with MRB Vermögensverwaltungs and GenTwo Digital to launch an actively managed certificate (AMC). The AMC is a fully bankable and transferable Swiss-compliant security with a Swiss ISIN code providing exposure to a portfolio of blockchain startups from Switzerland’s Crypto Valley.

We are going to have over 20 transactions in one year to have diversity in the portfolio - Olaf Hannemann

“From day one we knew we needed to develop funding initiatives beyond the equity investment side of the business – so on top of attracting new investors to allow us to continue building the company we also wanted to make it accessible for the wider audience to be able to invest in the our portfolio of startups,” says CV VC’s co-founder & CIO, Olaf Hannemann (pictured).

CV VC evaluated the traditional fund routes (Luxemburg and Liechtenstein) as well as deal-by-deal structures, but decided the best option was a certificate, albeit with a fund-like structure.

The Swiss firm has been developing a track record before moving to become an issuer of its own products – CV VC has conducted 27 portfolio investments startups from 16 different countries from four continents.

“With the new AMC investors can invest in our portfolio of companies as well as our future investment pipeline,” says Hannemann, adding that this vehicle offers more flexibility than a traditional fund. “If you think about the type of investments we do ie private equity in the venture environment, we are engaged in multiple transactions as opposed to the traditional private equity approach which has a limited number of deals over the life of a fund. We are going to have over 20 transactions in one year to have diversity in the portfolio. The AMC offered us the most efficient way to bring all those assets together and making them accessible via one product.” 

GenTwo sees this as yet another example of it supporting the creation of a new landscape with new opportunities for companies and investors that can be materialised with structured products. According to Philippe A. Naegeli (right), chief executive at GenTwo, CV VC has a unique standing on the Swiss crypto valley ecosystem in that it was a pioneer that lay the foundations for many projects and initiatives in this sector.

“They are drivers of the ‘vertical integration’ of the landscape and have a strong understanding and broad oversight of the sector,” he says. “For us to collaborate with firm like CV VC goes beyond the product development and bringing new ideas to the market because these activities are helping to create a very dynamic alternative investment space were structured products have a role to play.”

Bridge building

GenTwo has become a sort of disruptor in the AMC space as it can help companies to grow and raise capital using its SPV platform as well as bring new actively managed underlying strategies to the passive world.

“[Our approach] reinforces our commitment to help grow the market and attract new investment,” says Naegeli. “The clients have the expertise in the areas and sectors they cover – we’re just putting the tools in their hands to capitalise on these opportunities that are arising in an efficient way. We’re connecting the investment world with these sectors which enables our clients to bring new ideas to the market which we think it’s very important as we are contributing to expanding investor choice and meet demand for alternative products.”

CV VC is focused on equity and convertible investments into the startups in its portfolio, however given that these are blockchain technology startups that may consider issuing tokens as part of their business model, the venture capital firm is also considering receiving or investing in tokens in the future and house them within the certificate.

As the blockchain industry grows, CV VC plans to identify certain industries where blockchain technology is having a major impact as well such as fintech or healthcare - supply chain, track and trace, patient data, and develop dedicated investment vehicles on an industry by industry basis through issuing additional AMCs.

“The ease of use of AMCs would also enable us to deploy individual AMCs for individual startup investments from within our portfolio to easily syndicate such investments,” says Hannemann.  “These products have a clear and simple structure, can deliver bespoke exposure and don’t need a high amount of seed capital and these are elements that investors appreciate.”     

The partnership between the two firms was a natural process as CV VC is a strategic investor on Gentwo Digital.

According to Naegeli, these opportunities are having a multiplying effect on the market with an increasing number of firms considering the SPV route, and the flexibility of structured products such as trackers and AMCs to bring new investment ideas to the market and issue their own products.

“We want to continue playing an enabling and facilitating role – there is huge amount of talent and ideas out there, and there is also a need to bring products to the market in a different way,” he concludes. “Because of the need for new products and alternatives to issue them we are confident this is only the beginning – we expect the product offering will increase as new firms start using SPVs to serve their clients and fund their projects with structured products.”