The German investment outfit Lennertz & Co. is set to become one of the largest fund of funds operating in the blockchain space as the firm seeks to raise $165 million for its third crypto-focused vehicle. In an interview with Fortune, Lennertz’s head of fund investments, Oksana Tiedt, said the fund has already had its first close, although she declined to share a figure.
A multi-family office established in 2015, Lennertz invests across different asset classes, including private equity and traditional venture capital. The firm began betting on the blockchain space around 2016, privately investing in one fund before launching a $35 million fund of funds in 2020 and a second $65 million fund in 2022.
As a fund of funds, rather than investing directly in portfolio companies or token deals, Lennertz invests in other firms, including well-known crypto VCs such as Multicoin, Polychain, and Hack VC. Its second fund focused on generalist funds with crypto strategies, including Bain Capital, Lightspeed, and Andreessen Horowitz.
Tiedt said that Lennertz decided to raise a new fund in part because of the performance of its crypto holdings versus other investments. “We’re seeing real distributions from these funds, whereby when you have a tight market like now, everybody from private equity to venture is just struggling with lack of distributions,” she said. “Blockchain is actually sitting quite comfortably.”
Investing strategy
The past few years have been a rollercoaster for the crypto industry, with the bull market of 2021 giving way to the collapse of FTX in late 2022, followed by a modest recovery spurred by the approval of Bitcoin ETFs in early 2024. Today, prices are largely stagnant for the major assets, with a low appetite for new token launches and consumer projects.
Tiedt said that Lennertz’s strategy of investing in other funds, rather than directly into companies and tokens, has helped it avoid the pitfalls of the recent volatility. She expressed optimism that funds are beginning to look beyond infrastructure and middleware projects, with more adoption coming, especially at the B2B level. “The topics that are interesting, of course, are everything around DeFi and everything around the cross of blockchain and AI,” Tiedt told Fortune. “So it’s all about distributing data versus centralizing data.”
In its third fund of funds, Lennertz plans to invest in eight to ten blockchain-focused venture capital funds, with some in Europe but the majority in the U.S. Tiedt said that Lennertz has raised enough capital to invest in two funds, Polychain and Bain Capital’s crypto fund.
While some traditional investors have stayed away from the often radioactive sector, which deals with a constant onslaught of regulatory issues alongside constant price swings, Tiedt said that Lennertz’s base of around 40 families—which she described as mostly entrepreneurs—supports its investment thesis. The returns likely don’t hurt, with the initial two funds both logging an internal rate of return over 35% per year.
Tiedt said that blockchain comprises around 10-12% of the firm’s overall investments.
Lennertz is not the only crypto fund that is raising new capital. In September, Fortune reported that Accolade, a U.S.-based fund of funds, had raised $135 million across two vehicles and is likely still continuing to market. Hack VC, one of Lennertz’s portfolio funds, has also raised $77 million.
The crypto sector may still be far from its peak in 2021, but dry powder is starting to accumulate on the sidelines.
