The Alternative Investor - Issue #2

Two trends have particularly driven Vauban’s activity on the Startup SPV side, since the start of the Covid-19 crisis:

1.   Bridge rounds and convertible loan notes of companies looking to extend their runways; 

2.   Secondary transactions

The latest is an interesting window into the psychology of a financial crisis. 

Founders, employees or investors are more likely to want or need cash when an economic crisis hits, and as such, will be looking into selling some of their shares on the secondary market. 

On the other hand, savvy investors will always have an appetite for shares of a great company that can be bought at a discount. 

How can we help? We enable founders, employees and investors to get quicker access to their capital by using our SPV structures. You can read the piece that we wrote about secondaries here. 

Some would say that investors’ appetite for hedge funds have been in decline since the credit crisis comparatively to other asset classes. Low-interest rates and never-ending bull market seemed to favour passive public equity investments and private equity disproportionately. But that changed in 2020: Uncertainty over the future rose investor’s interest in market-neutral vehicles such as hedge funds, and the high volatility gives them a perfect environment to thrive. At Vauban, the impact was clear and clearly we have never seen so many hedge fund launches.

Lloyds, the UK-based global insurance & reinsurance market is barring its members from investing in Irish and Luxembourg UCITS funds by 2022.

This is big news: Ireland and Luxembourg are the leading EU fund jurisdictions, and UCITS is one of the most popular open-ended fund structures in the world.

When such barring happens, it is generally due to a lack of compliance, but paradoxically, this time round, it is friction due to too much compliance that triggered it. More precisely, it is because of unnecessarily, onerous compliance requirements disproportionate to what the industry actually need.

The real problem is not too much compliance, it is compliance done in an inappropriate way without keeping the user experience in mind. There is a general assumption in the industry, that the more frustrating you make the experience to your client, the more compliant you are. It is, of course, untrue. Challenger banks have shown that, by using technology and data, you can make compliance friction-less, and fight financial crime at the same time in a way more effective manner than by adopting an analogue approach.

Vauban strives to provide a smooth onboarding experience to the investors of the funds we administer. We are currently working on a system that should make investors’ onboard in a matter of minutes.

You can read more about this story here.

One of the great joys of working at Vauban is to be confronted daily with the creativity of dealmakers and see how they use wealth containers. We had various classic cars, racehorses, Uber black car fleet and so on, so it does really feel like Minecraft.

Interestingly, we recently came across a type of SPV on the blog of Harvey Multani which piqued our curiosity: The Employee-led SPV. It is essentially employees of a start-up putting a SPV together to raise in their network and invest in their employers. They collect carried interest on the way, greatly enhancing their upsides apon exit.

On the back of this insight, we wrote a short article about Employee-led SPVs here. 

Finding new ways to make alternative investing faster, easier and more accessible is what we are all about, and we welcome any ideas to help achieve this goal. 

We are working on a new front-end for our Dashboard. We have involved existing and prospective clients into the process to ensure that it’s perfectly fit for purpose. I don’t want to say too much, so that you can experience it yourself when it is finally released, but here is a sneak peek:

We are working hard to bring great user experience to the alternative investment space, and we couldn’t do it without you. Please do not hesitate to reach out for suggestions of features you’d like to see in our new platform.

Rémy, Co-founder of Vauban