Timo Lehes, co-founder and partner of Swarm Fund, has a background in technology, in particular when it is applied to investment.
“I am now more interested in the automation of institutional finance and how to use platforms to make it more efficient to match a corporation with investors or use a new layer of infrastructure.”
The result is the Swarm fund which takes the initial coin offering (ICO) route to raise money to create a platform for alternative investments. ICOs have been under fire from regulatory authorities from China to the UK over recent weeks, but Lehes believes that it is the best way for them to go in building their product.
“If you look at how to build a project it takes quite a lot of resource,” he says. “It’s a very long game to change the way you access alternative investments. In order to do that you have to demonstrate the asset classes are viable and have track record and are premium investment opportunities and there is also regulatory work.
“So, we had to have a lot of capital to check that the platform was properly funded and the ICO was the best source of capital for this type of project – the token sale mechanism emerged as the best mechanism.”
The target is to raise USD55 million. The fund is a decentralised capital marketplace that provides cryptocurrency investors access to high-return, institutional-style investment funds backed by real-world assets. The compliance-oriented structure of its ICO will run from September 7 through September 22, 2017.
The firm has created a two-tier token architecture which means that the Swarm token is a functional token allowing investors to be included in what is going on the platform in a step towards what it calls investor democracy.
The second tier represents the value of the sub-funds connected to Swarm. The offering is aimed at family offices and institutional investors.
Lehes says: “If you compare Swarm with those platforms out there now in the asset management space, a lot of them take the view of how to create best possible returns in the ICO market, many are based on crypto currencies, buying bitcoin or ether and that approach is a good opportunity but the way we look at it is that the alternative coin market tops out at USD160 billion so we don’t just focus on crypto, we look at interesting alternative investment classes out there that are not on a blockchain yet.”
Despite his background, Lehes says that the firm deliberately steered away from technology funds because they felt that there were better investment opportunities in the asset classes they have selected.
The first one is a distressed real estate fund specifically targeting US properties. “It’s special situation distressed with regards to their lenders buying those properties through a foreclosure process and renting them back to their previous owners,” Lehes says.
“Each case is quite small but this firm has an automated machine based way of identifying thousands of those per day and have USD20 million in the strategy with continuous pay outs from dividends.”
The next fund is a solar investment sub-fund, run by a veteran manager in the sector who has managed billions of dollars over 25 years but wanted to find an alternative source of limited partner capital for this fund.
“The key criteria is seeing sub-funds that have a continuous cash pay out profile because otherwise you are working with appreciation capital on paper which is problematic because if you have no liquidity or pay outs then you don’t know what they are worth.”
Lehes describes Swarm as a second-generation wealth fund platform. The first was the robo-advice platform, he says. “Swarm is not doing ETFs, we are doing alternative investments with higher yields and we can grow to a similar size.”
