Fund Tokenization: Fractional Issuance, Streamlined Redemption, and Servicing Benefits

Quant | Rebecca Hackworth | Nov 28, 2022

Fund Tokenization - Fund Tokenization:  Fractional Issuance, Streamlined Redemption, and Servicing BenefitsAlternative fund managers are starting to recognise the benefits of tokenised funds - a new dawn for alternatives

  • For fund managers, the potential to tap into an even wider cohort of investors is a significant opportunity.
    • A recent study of 100 European fund managers by Madrid-based tokenisation platform, Token City, found that 52% are looking at tokenisation and 73% plan to invest in the next three years.
    • ​“Regarding adoption, more than 85% of fund managers think if they don’t consider tokenisation, they risk being left behind,” says Yael Oaknin, Founder and CEO of Token City.
    • “Tokenisation could improve several areas within asset management such as issuance, exchange and servicing. Potential benefits include improved access to, and personalisation of, investment solutions,” she adds.
    • It gives managers the option to provide fractional ownership of their funds in an evergreen structure and offers accredited investors the chance to invest more easily.  Evergreen funds have no termination date. They allow managers to re-invest capital in companies with the most attractive growth prospects, while avoiding missing the additional upside when they IPO.
    • Simpler redemption:  additional benefit is that the underlying smart contracts controlling economic ownership ensure that exit liquidity on the secondary market is more orderly, transparent and streamlined.

See:  Singapore Announces Project Guardian to the Value Created in Leveraging Asset Tokenization

  • In private credit, Linx Capital Investments tokenised a portfolio of senior-secured loans on Token City with Oaknin stating: “credit managers like Linx are using our system as a substitute for securitisation — tokenising credit rights as opposed to selling bonds. We are also speaking to fund managers and SMEs operating in the real estate and renewable energy space.
  • Another private credit manager to leap forward is Singapore-based SeaTown. Last November, it onboarded the SeaTown Private Credit Feeder Fund onto the private market exchange, ADDX. In doing so, it reduced the investment minimum for accredited investors from $5m to $20k, opening the fund to a new set of investors.
  • Hamilton Lane, the US-based private markets investment manager, jumped quickly on tokenised fund solutions. In May 2022, it announced it was offering fractional access to its Global Private Assets Fund on ADDX to tap into a broader set of Asian investors.

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NCFA Jan 2018 resize - Fund Tokenization:  Fractional Issuance, Streamlined Redemption, and Servicing BenefitsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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