Update: Abrdn’s completion of its £1.5bn takeover of Interactive Investor, has come in the nick of time for Augmentum Fintech (AUGM ), giving it much-needed cash with which to back its fast-growing unquoted businesses during a downturn.

Shares in Augmentum, the only London-listed fund focused on early-stage European fintech companies, jumped 12% today as the company said the sale of its stake in the stock broker had brought in £42.8m, while annual results reassured investors on the strength of its portfolio.

Chief executive Tim Levene said the sudden shift from a ‘risk-on’ bullish market to a fearful ‘risk-off environment’ in the second half of its financial year had not surprised him, but the ‘healthy cash buffer’ – with ‘dry powder’ rising today to £60.6m or 21% of net asset value (NAV) – would help to ‘both support our existing portfolio and also capitalise on compelling opportunities in the fintech market over the coming 12 months and beyond.’

Like fellow fintech investor Chrysalis (CHRY ), Augmentum has had a tough 2022, its shares slumping a third as investors have worried about the risks of backing private companies when interest rates are spiking and public stock markets are temporarily closed to new entrants, depriving them of a source of capital.

In the year to 31 March, after performance fees, NAV per share rose 19% to 155.2p, with an underlying 9.2% investment return in the second half. Shareholders, however, saw their stakes fall 16% over the 12-month period as the trust fell to a steep discount that prevents fund-raising in the short term.  

In contrast to Chrysalis though, investors are warming to Augmentum. Whereas Jupiter-managed Chrysalis, a late-stage investor in unquoted companies, is weighed down by the falling valuation of credit company Klarna and fears some of its companies may run out of cash, Augmentum has impressed investors on the state of its 24 investments in digital banking, wealth management and financial services infrastructure.

Today’s 13pp leap to 118p reduces Augmentum’s wide share price discount from 32% to under 26%, which Numis Securities said was still attractive for an experienced team that had experienced three market downturns, including the 2008 financial crisis.

The rally, which follows a 14% rise last week, came as Augmentum said its top 10 portfolio companies had grown their revenues by 96% in the year to 31 March and were either profitable or had cash to last 17 months.

It also said 19 of its holdings, accounting for 79% of NAV, had features such as anti-dilution agreements and liquidation preferences to protect the value of its investments should portfolio companies raise money at significantly lower valuations.

Levene said his team had taken a conservative approach, slowing down the pace of investments in the second half of the year to just one small new deal, as valuations soared before the growth sell-off began in earnest last November. 

Excluding Interactive, the top 10 positions were valued at just 5.3 times revenues, in line with Augmentum’s previous three years, but in contrast to the High Growth Fintech index, which saw multiples of quoted fintech compaies soar to 24 times last year.

The company is pinning hopes for future growth focused on business banks Tide, Zopa and AnyFin alongside wealth managers Cushon and Grover, the reseller of second-hand phones and laptops.