In a strategic move, a recent announcement has shown that Lennertz & Co., a major German investment firm, is racing to become one of the biggest funds in the blockchain space as it prepares to launch a $165 million fund for its third vehicle focused on crypto.
The company’s commitment to the cryptocurrency sector and something of a swagger in its faith in blockchain technology come through in this major step.
While specific numbers weren’t disclosed, Oksana Tiedt, Lennertz’s head of fund investments, told Fortune that the fund has already had its first close. Lennertz’ latest fund comes on the back of a $35 million fund from 2020 and a $65 million fund from 2022.
The firm’s success in this sector and the rise of interest in blockchain related opportunities is clearly seen in the rapid increase in fund size.
Investment Strategy and Portfolio Composition
Lennertz & Co. is a fund of funds that invests in other firms rather than in portfolio companies or token deals directly. Thanks to this strategy, they’ve been able to engage with well known crypto venture capital organizations, e.g. Multicoin, Polychain, and Hack VC.
The second fund subsequently expanded to include crypto strategy as general funds, investing in Bain Capital, Lightspeed, and Andreessen Horowitz, among others.
The diversified approach has been beneficial, particularly in this current market situations. They recognise that crypto is outperforming other investments, Tiedt said, ‘We are seeing real distributions from these funds, and when you have a tight market like now, you see everybody in private equity to venture just suffering distribution issues.’ However, blockchain sits quite nicely actually.”
Lennertz said for their third fund, they would invest in eight to ten blockchain venture capital funds, most of them in the U.S. with some in Europe.
Market Outlook and Investment Focus
Having endured volatility in the crypto world since then, including the 2021 bull market, the dust up of FTX at the tail end of 2022, and the nascent bounce off Bitcoin ETF approvals in the first part of 2024, Lennertz remains bullish.
Particularly interested in DeFi (Decentralized Finance) and the intersection of blockchain and AI, Tiedt highlighted the goal of data ‘distributing’ over ‘centralizing,’ and thus focusing on ‘distributing’ rather than ‘centralizing data.’
It is a perspective that is consistent with broader trends in the tech industry, but also a point of growth and innovation to pursue. By investing in funds as opposed to investing in companies and tokens, the firm has managed to sail through the recent market volatility better. However, Tiedt expects greater adoption, particularly at the B2B level, on the path to maturing blockchain beyond infrastructure and middleware projects.
Lennertz’s Position and Industry Trends
As part of a wider transformation that is seeing traditional investment firms invest more into blockchain and cryptocurrency assets, Lennertz & Co. has expanded its investment in the crypto space. Tiedt said the firm’s investment thesis in this often controversial sector rests with its base of about 40 families, who by and large are entrepreneurs.
Investor confidence has likely sprouted from their impressive performance of their first two crypto funds, yielding internal rates of return over 35% per year. At this juncture, Blockchain investments represent around 10-12% of Lennertz’s entire portfolio, which signifies a solid if cautious investment in the space.
This is by no means unusual: another example is Accolade, a U.S.-based fund of funds, which has raised $135 million between two vehicles to deploy into crypto.
The fact that these developments point to an institutional appetite for crypto, in spite of regulatory challenges and market volatility, speak to the potential maturation and wider acceptance of blockchain ‘as an investment’ in the investment world.