Financial services giants back Catalyst for growth

The European Financial Services Venture Fund (EFSVF), Europe’s only dedicated fund for niche-oriented retail financial services companies, held a final close on GBP40 million in late July.

Launched early last year by Catalyst Fund Management & Research, EFSVF is positioned to capitalise on radical changes in the financial services sector as technological advances and deregulation break down barriers to entry.

Although EVSF fell short of its original GBP50 million target, the calibre of support it has attracted from within the financial services industry is testimony to the appeal of Catalyst’s investment proposition. The fund’s core shareholders have co-investment rights, which give Catalyst the firepower to deploy up to GBP15 million per deal.

European backers include Credit Suisse, ING Group, Invesco, Kempen, Swiss Re, the Eureka Fund and Winterthur, while Legg Mason, Nvest LP and an unnamed top-ten US bank number among the US participants. Ten private investors from both the US and Europe also signed up to EFSVF. European investors provided approximately two-thirds of the fund’s capital.

EFSVF is unlikely to encounter serious competition for retail financial services opportunities from mainstream private equity funds, most of which are precluded from investing in the sector. However, the fund is also targeting companies providing specialist technologies and services for the financial sector; in this area, the vehicle will clearly be in head-to-head competition with Internet and generalist IT funds.

EFSVF’s first investment, completed last December, perfectly exemplifies the fund’s niche retail focus: Massow Financial Services taps the power of the pink pound’ provides insurance and other financial services to the UK gay community. EFSVF’s second transaction was close to completion in mid-August, according to Catalyst investment director Alice Chapman. She added that the firm had just agreed heads of terms on a third deal, which would take the value at cost of the fund’s portfolio to around GBP10 million.