By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - U.S. investment firm Valentus Capital Management will raise part of a $250 million (£196.6 million) credit fund through the public sale of its own unique virtual currency, the company's top official told Reuters in an interview on Tuesday.
Valentus, which launched in March this year, aims to register as a private equity firm with the U.S. Securities and Exchange Commission.
Its first fund - the Credit Opportunities Fund I - hopes to raise $50 million through the digital token sale scheduled sometime this year, said Behzad Taufiq, Valentus' chief investment officer.
He added that this would be the first time a private equity credit fund will raise capital using a digital token that will be made accessible to global retail and institutional investors.
Valentus aims to invest in assets such as mortgage securities and distressed debt, a lucrative area that saw private equity giants Apollo Global and KKR & Co raise $1.75 billion and $4 billion, respectively, the last few months, for credit funds focused on COVID-related dislocations.
Financial services companies are increasingly resorting to "tokenizing" their assets - a process of creating and issuing a virtual currency on the blockchain that digitally represents a real tradable asset. These tokens can be traded online in a secondary market and provide companies with increased liquidity and access to a broader base of investors.
Valentus is partnering with technology provider and fund manager Realio for the digital asset's public offering.
The token, called VAL1, gives the holder a digitized claim to the limited partnership interests of a Valentus fund.
"As I started thinking about raising capital and saw the traditional route that everyone takes, with roadshows, travel, and going after the same institutions, I was looking for an alternative way to raise capital from the retail sector," said Taufiq.
"I think what we have understood recently, especially when you see the fluctuations in the broader equity market, retail investors, especially when they have access to assets, are a strong force to reckon with."
The public sale will likely take place before the end of the year, or possibly in early 2021, Derek Boirun, chief executive officer and founder of Realio told Reuters, noting that appetite for private equity tokens during the coronavirus pandemic is uncertain.
Through the token offering, investors can be part of the Valentus fund with a minimum investment of $10,000, as opposed to traditional private equity transactions that require millions of dollars to participate.