When people you barely know start telling you about a hot investment that’s only going to go up and up, you can guarantee it’ll end in tears. Everyone, from my dentist’s receptionist to blokes down the pub, seemed to be bending my ear about the same thing at the tail-end of 2017. It was, of course, Bitcoin, as it soared to what would prove to be a peak of not far off $20,000 a coin — before crashing spectacularly.
I don’t suppose many of those who got caught up in Bitcoin mania knew much about the technology behind it, its history, or the history of speculative bubbles in general. I can’t say I understand the technology myself, but I do take an interest in history. While I agree with my colleague Alan Oscroft’s debunking of Bitcoin (and other cryptocurrencies) as a new asset class, its history is nevertheless interesting. Indeed, reading about Bitcoin’s origins helped lead me to an investment trust that I think could be far more rewarding than the cryptocurrency.
Distrust of banks
Bitcoin emerged as the Great Financial Crisis was unfolding. The domain name bitcoin.org was registered in August 2008, and in January 2009 the genesis block of Bitcoin was mined. Embedded in its coinbase was the text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Distrust of banks and an urge to decentralise was implicit in the launch and technology of Bitcoin. While it has so far struggled to become anything much beyond a speculative token, the banking crisis provided other entrepreneurs with the impetus to develop, or found, new businesses, with the potential to disrupt the established financial system.
Augmentum disruptum
In 2010, “a well-networked, experienced team of entrepreneurs and investors who have been both sides of the fence” founded Augmentum Capital, with the backing of veteran financier Lord Rothschild’s RIT Capital.
Their aim was to seek out and invest in exceptional private Fintech businesses, disrupting the banking, insurance, asset management and wider financial services sectors. Last year, the group launched an investment trust, Augmentum Fintech (LSE: AUGM), raising a total of £94m at 100p a share.
Management is focused on businesses they believe have the greatest potential to deliver exponential growth on the capital invested. The trust’s initial portfolio consisted of stakes in the following five businesses:
- BullionVault – the world’s largest retail precious metals investment and trading platform.
- Interactive Investor – the UK’s leading flat fee investment platform
- Seedrs – Europe’s leading equity crowdfunding platform
- SRL Global – a monitoring, measuring and managing platform for large family offices, endowments and pension funds
- Zopa – the world’s first peer-to-peer lending platform
Since launch, the number of investments has increased to 13 — approaching the trust’s target of 15 to 20.
I think Augmentum has a strong management team, and I like its intense focus on a concentrated portfolio in the exciting Fintech space. This is not the sort of trust I’d want as a core holding, but I’d be happy to buy a few shares for its spicy high-growth potential. As for Bitcoin, count me out.