BEVERLY HILLS, Calif. - AdultVest, a firm that seeks to match adult entertainment businesses with qualified investors, is preparing to launch a hedge fund within the next 45 days.
The fund will originate real estate loans to aid adult entertainment clubs' expansion plans in the U.S. and Canada, according to AdultVest founder Francis Koenig, who said he expects loans to range from $500,000 to $10 million.
"Many of these clubs are not able to obtain [real estate] financing through banks because banks won't lend to adult-use properties," said Koenig.
With more than 3,700 gentleman's clubs in the U.S. and Canada, Koenig sees enormous profit opportunity, but banks and firms may be hesitant to put "dirt on their sleeve," so they are "missing out on tremendous profit" he said.
Koenig shrugged off any negative impact the fund might have on his personal or professional reputation.
"We have an opportunity to capitalize on a market that's been ignored," he told AVN Online. "One of the reasons people have shied away is because things are done in a bootstrap manner, but if they were done at a classier level, it would change people's perception."
The fund will offer returns based on the amount invested. For yields comprising the London Interbank Offered Rate Index plus 5 percent, the investment minimum is $5 million; for LIBOR plus 4 percent, the investment minimum is $1 million. LIBOR plus 3 percent requires $100,000, and LIBOR plus 2 percent requires $25,000. The fund will not charge fees.
If a club owner who receives a loan defaults, AdultVest can foreclose on the property and buy the club itself. By lending 50 percent of the properties' value, the loans represent very low risk, Koenig said.
"It makes it a highly secured asset," he noted.
In addition to the hedge fund, AdultVest manages two private equity strategies launched last year.
Prior to forming AdultVest in September 2005, Koenig founded Koenig Venture Partners, a hedge fund incubator and seeder. He started his work with hedge funds at the tender age of 14, as a researcher at his father's hedge fund firm, New World Partners.
Later this year, AdultVest also plans to host the first annual AdultVest Investment Conference in Los Angeles. Koenig said the conference aspires to match institutional and accredited investors with adult industry related investment opportunities. To date, the company has received interest from more than 1,000 accredited investors, and nearly 300 adult companies have pre-registered, Koenig said.