Peter Lynch, the famed investor and vice-chairman of Fidelity Investments, often advised to "invest in what you know". Maybe that's why Francis Koenig thinks Wall Street is ready to put big money into the adult entertainment business.
Koenig is the chief executive and founder of AdultVest, "the world's first and only investment community designed specifically for the adult industry," according to the company's website.
AdultVest matches buyers with sellers of strip clubs and other businesses; offers a forum for "talent" to be bought and sold in the adult industry; and seeks out investors to pony up money for hedge funds that invest in clubs, adult-toy companies, porn-movie producers and other legal players in the sex business. It is the latter - the hedge funds - that are the "primary focus" of AdultVest, Koenig says.
Primary, perhaps, but not quantifiable for anyone trying to determine how much cash has come AdultVest's way. Koenig won't say how much money is under management, allowing only that it's a "small group" of institutional investors - fewer than 20 - in his Bacchus investment fund including one pension fund that he declined to name. The minimum investment is $1 million (R8 million).
His second fund, the Priapus investment fund, has lured enough smaller investors expending a $100 000 minimum that Priapus was able to purchase the domain name iPorn.com, which Koenig calls "the crown jewel of the portfolio". Priapus also owns shares of strip club operator VCG.
Koenig would not say what was paid for iPorn.com, which consists of the domain name only and no content. But he hinted that a similar domain name - porn.com - fetched $9.5 million last year.
His investors may be anonymous; his business may be sordid and the amount of money he's managing may be a mystery. None of that will keep Koenig from being among the luminaries honoured at New York's Cipriani Wall Street on Wednesday, where Michael Steinhardt and other hedge fund icons will gather for the black tie sixth annual hedge fund industry awards sponsored by Total Alternatives. AdultVest is among four nominees for the Hedge Fund Launch of the Year award.
Koenig says he thinks that investors "have gotten over the moral issues" related to adult investing. There may be something to that. The New York State Common Retirement Fund, the California Public Employees Retirement System, and the Commonwealth of Pennsylvania Public Schools all disclosed in Securities and Exchange Commission (SEC) filings that they owned VCG shares. That should go over big with the kindergarten teachers and school social workers.
Money managers JLF Asset Management, Burlingame Asset Management and Slater Capital Management also held stakes in VCG as well as strip club operator Rick's Cabaret International, according to SEC filings.
Rick's is a particular favourite of the Wall Street crowd, who stop in for a quick lap dance, by making sure there's always a TV screen tuned in to CNBC.
Considering the company AdultVest keeps, it should be no surprise that Koenig's venture gives many investors the creeps. When AdultVest appeared at the Erotica LA trade show, its co-exhibitors included Little Fetish Fairy, a seller of provocative women's clothing; Desire Resort & Spa, a nudist resort; and, proving that this is the ultimate open-minded crowd, Escorts for the Disabled. Visitors to the show could attend seminars such as Sex Toys for Beginners.
Paul Fishbein, the publisher of AVN Media Network, which runs adult trade shows and publishes magazines about porn and other adult businesses, said that for AdultVest to succeed, it would need "big-name acquisitions", including a content producer, an internet outlet, and a big player in the sex-toy business. AdultVest is an AVN client.
At AdultVest, Koenig is feeling good - that's the idea, after all - about his crown jewel, iPorn. He's offering free membership for customers who sign up for a "pre-launch" test before he unveils the website later this year.
"Twenty percent of our traffic is from iPhones", he gushes of the initial response, adding that iPhone users can download the iPorn icon "right on the phone so that you can access your iPorn any time you're on the go". Porn watchers can even "carry it with them and watch on an airplane". Uh, not if they're sitting in my aisle, they won't. Flight attendant, could you ask the guy in 3D to give up his toys and just read a book or something?