Aslaug Magnusdottir, the firm's managing director, told Reuters that TSM finalized the purchase in the last few days. She declined to specify the size of the investment, except to say it was "a significant minority stake."

"We only invest in companies where we can take a very active role, so the stake needs to be significant enough for us to really have the ability to influence, and also to be able to capture significant financial upside, because we're only doing a few, select investments," said Magnusdottir.

Rachel Roy cut her teeth designing women's clothes at Rocawear, the urban clothing label Iconix Brand Group Inc (ICON.O: Quote, Profile , Research), bought in April for $204 million.

Roy is also married to Damon Dash, the hip-hop mogul who co-founded Rocawear with his former business partner Shawn Carter, the rapper known as Jay-Z.

This is the second investment for TSM, which was formed earlier this year by former Bloomingdale's Chief Executive Marvin Traub; Magnusdottir, who used to work at Iceland's Baugur Group; and Mortimer Singer, a former consultant with Marvin Traub Associates.

In August the firm announced a stake in British fashion house Matthew Williamson Holdings Ltd.

Magnusdottir said the firm's goals for the brand include bringing it to department stores overseas, opening up Rachel Roy retail stores in the U.S. and expanding into other categories such as handbags and shoes.

She added that TSM was in the process of assessing a number of other opportunities to invest in early-stage brands, but said it was too early to name them. (See http://blogs.reuters.com/category/themes/shop-talk/ for "Shop Talk" -- Reuters' retail and consumer blog) (Reporting by Martinne Geller, editing by Gerald E. McCormick)