UK crowdfunding website launches managed investment fund

LONDON Mon Jan 27, 2014 6:51am EST

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LONDON Jan 27 (Reuters) - A British website which allows members of the public to buy stakes in small unlisted businesses has launched a fund for people who would rather leave the decision over where to put their money to a professional.

As banks rein in lending due to tougher capital rules and greater regulatory scrutiny, crowdfunding, which originated as a way to raise money for creative projects, has expanded rapidly as an alternative source of finance.

Crowdcube, which has more than 57,000 investors in the UK, said the managed fund was the first of its kind and would enable people who want to invest but who do not have the time or resources to review company pitches and carry out their own due diligence.

The growth of crowdfunding has prompted some concern that not all individuals are aware of the risks involved in investing in start-up or early stage businesses, which Office for National Statistics research shows at least half fail.

Last year Britain's financial watchdog proposed tighter controls for crowdfunding websites, including limits on the proportion of their portfolio people should hold in unlisted shares or debt securities, aimed at protecting inexperienced investors.

The Crowdcube Venture Fund, which has a minimum individual subscription of 2,500 pounds ($4,100), will be managed by Strathtay Ventures, a subsidiary of Braveheart Investment Group .

"There are a large number of investors who like the crowdfunding concept but who, for one reason or another, find the DIY route problematic," said Geoffrey Thomson, Chief Executive of Braveheart.

Crowdfunding websites helped companies and individuals worldwide raise $2.7 billion from members of the public in 2012, an 81 percent increase on 2011.

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