US hedge fund invests in £4bn British fintech star TransferWise

US-based global investment firm D1 Capital Partners L.P. (D1) has announced it has purchased a stake in one of the UK’s leading fintech companies – online money transfer service TransferWise.

Sky News reported on Monday that D1 has bought a $200 million stake in TransferWise as part of a secondary share sale last week, which saw the start-up’s value soar to $5 billion, a $1.5 billion increase on this time last year – and roughly equivalent to £4 billion.

Both companies involved in the transaction are young blood in the industry.

TransferWise was set up 9 years ago by Kristo Käärmann and Taavet Hinrikus – an Estonian financial consultant and a former Skype employee respectively – to provide a solution to the ‘pain of international money transfer’. The company has since grown to offer more than 750 currency routes, with Forbes reporting that it had reached a generous net profit of $8 billion in 2018.

D1 is barely getting started, having been launched in 2018 by Wall Street investor Daniel Sundheim, who previously stood at the helm of Connecticut-based hedge fund Viking Global Investors until 2017. Last year, Business Insider deemed the budding firm ‘one of the hottest new hedge funds’ in the industry, and the company already has an established portfolio of stakes in Amazon, Netflix and Facebook.

The $200 million purchase will give D1 a 4% share in TransferWise’s operations, which boast over 2,200 employees nationwide and more than 8 million customers. Its impressive £4 billion valuation sets TransferWise above the vast majority of UK fintechs, joining only the likes of money transfer giant Revolut in surpassing the lofty benchmark.

At the start of this month, City A.M. reported that the Financial Conduct Authority (FCA) had granted TransferWise with a license to offer investment products, opening up its customer accounts to earn interest on their funds, although the company still does not own a full bank license.

Commenting on TransferWise’s growth, CEO Käärmann stated:

“TransferWise is evolving from being a pure payments provider, to the number one alternative for the banking needs of those living and working between countries. With £2bn in deposits we know that people want to hold their money with TransferWise, so we’re very happy to soon provide a way to make a return on that money”.

The company reportedly racks up £1 billion in savings compared to cross-border transactions made through standard high street banks.

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Junior Journalist at the UK Investor Magazine. Focuses primarily on finance and business content. Has personal interests in Middle Eastern politics, human rights issues, and sustainability initiatives.