April 20, 2022

Talking business: “Our goal is to introduce VC asset class into regular distribution network”

I see no reason why we should not disenchant Venture Capital and treat these investments as an alternative to bonds, real estate or stocks of public companies. Alternative investments such as Private Equity and Venture Capital are the fastest growing asset class in the world. The share of VC investments in global investors' portfolios is forecasted to reach 15.6% of AUM by 2025 - says Paweł Osowski, director of Anderton SICAV.

- There is a hunger for innovation. Publicly traded companies that have their own innovation labs and accelerators are also looking for it. They create funds themselves, similar in structure to VC funds, in order to buy innovations on the market for their own needs and develop under their own roof. The market has great prospects. I don't think we can talk about a start-up bubble. It's like saying that you need to stop developing, because creating innovation is too expensive - says Paweł Osowski, director of Anderton SICAV during an indepth conversation with Kasia Krogulec.

Anderton SICAV is a team of professionals who previously worked for large global financial institutions, incl. BlackRock, HSBC Private Bank, GE Capital, JPMorgan, Neuberger Berman and for the European Commission. The fund's shareholder is Gamma Capital Markets (GCM), an international asset management company with a portfolio of EUR 1.2 billion. Anderton SICAV PLC is a collective investment institution organized as a public investment company with variable capital (SICAV). Anderton is regulated by the Maltese Financial Conduct Authority (MFSA). Anderton’s product, the Challenger Impact High Income Fund I, is available all over Europe - in February it was notified with the Polish Financial Supervision Authority - which means that it also found its way into the Polish distribution network.

What is SICAV?

Paweł Osowski: A SICAV is a very popular structure for investment funds in European countries. In Poland, due to the lack of appropriate legal regulations – this structure is simply absent. The Ministry of Finance has been working on introducing SICAVs to the Polish legal system for several years, arguing the need to open the market up to proven solutions, widely used in other European Union countries. According to the ministry, it could also contribute to solid growth of new foreign investments. A SICAV is a simple and flexible solution - the investor does not own participation units but is a shareholder of the fund - has the right to dividends, voting rights, the right to redeem shares, the right to resell. The process of "acquiring" the fund is the same as that of other foreign funds available in Poland.

How was Anderton born?

PO: The fund was derived from the market’s expectation. We see a growing appetite from individual investors and companies for venture investments, in a safe, regulated structure. The idea for an open-ended VC fund arose in Poland, as an initiative inspired by myself and a group friends whom I’ve known almost all my professional life: Joanna Stec-Gamracy, former country head of BlackRock, Robert Mikulski, attorney-at-law, managing partner at Brillaw, Richard Piotrowski, and Gamma Capital Markets, an Italian asset manager who has included us in its international structures. The fund's global team of advisers is impressive and very diverse. We work, among others, with Roger Mitchell, former CEO of the Scottish Premier League, and Jasper de Trafford, ex-HSBC, great-grandson of a British and Maltese politician, former Prime Minister of Malta. Each of us is involved in the companies in which we invest in on an operational level.

Describe your innovative product - Challenger Impact High Income Fund I?

PO: ‘Challenger’ is an open-ended fund, which means that there is no defined end date, it retains certain liquid assets and invests continuously, including follow-up rounds or after an IPO. Investors may exit the fund no earlier than three years after their investment. The subscription process itself is very simple, but nevertheless, the verification of the source of capital and the investor's profile is meticulous. In Western Europe, Anti Money Laundering and Know Your Client procedures are much more restrictive than in Poland. The fund is supervised in tiers by: fund manager, custodian bank, transfer agent, administrator (Calamatta Cuschieri), and an auditor (Mazars). Our investors' money is the deposited with Zarattini bank in Switzerland. Managers and investment directors invest their own resources into the sub-fund, and our remuneration depends, among other factos, on the performance of the sub-fund. A very clean and transparent policy.

What do you want to change on the market?

Our goal is to introduce the Venture asset class into the regular distribution network. Challenger Impact High Income Fund I will be on the shelf with other funds - shares, debt, mixed, commodities, real estate, alternative funds, etc. I see no reason why we should not disenchant Venture Capital and treat these investments as an alternative to bonds, real estate, housing, land, or stocks of public companies.

Alternative investments such as Private Equity and Venture Capital are the fastest growing asset class in the world. The share of VC investments in global investors' portfolios is forecasted to reach 15.6% of AUM by 2025. Individual venture capital investments are characterized by a higher risk than publicly available equity markets, while diversified venture capital portfolios are not. Over the past 10 years, the venture market has experienced less volatility than equity markets, with rates of return starting to rise”

How do you rate the global VC market?

PO: There are over 10,000 funds in the world, classified as "venture capital funds", but these are complex products, unavailable to individual investors, requiring long-term capital freezing. Challenger Impact High Income Fund I is one of only 200 global alternative funds offered in an open structure. This provides greater flexibility and liquidity for investors. VC funds pump innovation and fuel growth for breakthrough solutions, but the very concept of a VC investment has not changed in thirty years. The impulse for change was recently provided by Sequoia, one of the oldest VC funds in the US, by introducing an open-ended fund to its offer, without the need for a 10-year capital freeze. I assume that this is a response to the growing, non-obvious competition resulting from decentralization - investment tokenization and equity crowdfunding. It is also, of course, a way to change the structure for Sequoia itself, to free up capital, and a way to attract a new investor base. In the long term, this may affect the dynamics of the entire industry.

What kind of companies can count on your support and what does it involve?

We aim for global opportunistic investments, that are socially responsible in both public and private capital markets. Through an open, regulated investment fund, we offer our investors access, among others, to select venture capital transactions, pre-IPO and minority growth capital transactions. We invest in global companies that have, or plan to have, exposure on the CEE market. On our radar we have medical, biotechnology, IT companies with a cyber-security profile, sportTech, and mobility. In addition to classic investments in exchange for shares or stocks, we offer Revenue Based Financing to selected entities - we provide working capital in exchange for a fixed percentage of current revenues. When selecting investment goals, we cooperate with strategic partners in Italy, Switzerland and Monaco. We have a subscription window open at all times. We raise money to fund all over Europe. We operate under a license of up to EUR 100 million in assets. We do not use public capital.

  • Minimum single first investment (for investors): EUR 100,000 (5k EUR each subsequent investment)
  • Estimated size of individual investments: 250,000 - 2 million euros or more (flexible policy).
  • Estimated asset lock-in period (for portfolio companies): 3 years
  • Estimated number of companies in the portfolio: approx. 15+

The fund is available to qualified investors.
What does this mean in practice?

PO: The offer is intended for professional investors who expect high rates of return on investment in the medium term and accept the risk. A professional investor is one who has the appropriate assets, knowledge of the markets and will invest no less than 100,000. euro. Gamma Capital Markets manages dozens of funds and has hundreds of companies in its portfolios. Information regarding the portfolios and historical performance and forecasts for the fund is not publicly available.

What is ‘Code of Polyethics’ and why is it important to you?

PO: The Code of Polyethics is a set of norms, a constitution for morality and ethics in politics and business, which was developed by my dear friend - Romanist and stock market investor - Przemysław Kroczyński. Przemek has been fighting for many years to attract politicians to his project, so far without much success. He believes that the voluntary adoption and application of the Code by politicians and business could improve the quality of social relations. Przemek wants to change the world for the better. We support this project. We apply the ESG principles in our investment policy, which in today's global situation - uncertainty, tensions and moral crisis - is of particular importance.

How is the VC market reacting to the war in Ukraine? Do you anticipate any significant changes for funds and start-ups themselves due to this current situation?

PO: It’s a little early for conclusions to what will happen to private markets in connection with the war in Ukraine. It all depends on the development of the situation, which is difficult to predict. Stock and commodity markets react compulsively in the short term. The volatility is great. Russia's attack on Ukraine will definitely change the geopolitical situation permanently, but there is a chance that the money withdrawn from Russia will flow into the CEE market. On the other hand, we have been observing the interest of Polish investors in foreign investments for some time - some of them are looking for interesting solutions for their money outside Poland. It is difficult to say whether this is due to fear or maturity and investment awareness.

What is your investment philosophy?

Our investment policy is very flexible and opportunistic. We invest in companies at an early stage of their development, in which we can increase the value several times, but only those that already have a product, recurring revenues, a team and an exit perspective. The first question we ask ourselves is the exit path. At the beginning, we need to know how we will exit the investment. And it cannot be a theoretical assumption that we will do an IPO, sell ourselves to a larger fund or to an industry investor, because these are all clichés.

We aim at products, services from a niche market that responds to a specific need, because mass-market products require years of scaling and huge amounts of money. We are more about investing smart money. We try to use our network of contacts and use our intuition and business experience to assess the chances of a good exit and to whom we will sell this business to at the end. If the investment committee does not see a viable exit path, we do not invest, even if it is a very interesting concept. Why? Because we have a very short horizon, we have to manage our capital very intelligently and take care of liquidity.

Do you think that SICAVs may be a willingly established form of fund in Poland in the future?

This is difficult to answer. Today we operate under the regime of a large financial institution, such as JP Morgan, Black Rock, or other foreign fund managers. And creating such a structure based on an open-ended fund that has its manager, appropriate licenses, a custodian bank, transfer agent, administrator, auditor - firstly, it costs a lot and, secondly, takes time. This is a very large barrier to entry. It is relatively easy to create an ASI or FIZAN, but it is a product for a Polish investor, and we have global ambitions. We offer our fund in a wide distribution network based on the European passport regulation in each jurisdiction of the European Union, so our field of impact is large.

What problems are young companies facing from your perspective?

Taking into account industries such as biotech, diagnostics or medtech, it is very difficult for Polish entities to break through with innovation to a global market dominated by large foreign corporations. Compare, for example, the capitalization of biotechnology or medical companies listed on the WSE versus other foreign markets. Polish companies with a product that often saves lives and health are valued low, and R&D work is not carried out to the end. The innovation ultimately ends up in the portfolio of a foreign contractor, work on the development of technology is continued there, and the Polish entity becomes a subcontractor of the corporation, which is to ignite the emotions of investors. Real value is basically create outside of Poland Therefore, sometimes it is worth looking for investment opportunities in Switzerland, the USA, France, Germany, Great Britain, because there is a greater chance that such an investment will be sold well. It is also a question of the relationship in these markets, the maturity of the markets. Most of the Polish companies that are recognizable in the world have long since left our country, in the sense that they conduct operations and earn money outside Poland. They have global products and the intellectual property rights have been registered elsewhere. Poland is still treated as one big BPO, i.e. as a technological base. There is still too little innovation in Poland, there is no space and conditions for it to be created here.


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