Nasdaq-listed private markets investment firm, Hamilton Lane, has teamed up with Singapore-headquartered digital securities platform, ADDX, to tokenise a portion of its Global Private Assets (GPA) Fund.
The development offers a broad base of investors exposure to the open-ended strategy, and reduces the size of minimum fund commitment from $125,000 through traditional distribution channels, to just $10,000.
The public release pointed to the move as enabling the fund’s “major foray” into Asia.
Borne of discussions that began late last year, the partnership marks the first time that Hamilton Lane has digitally tokenised a portion of its fundraising process.
While the number of tokenised shares remains undisclosed, Fred Shaw, chief risk officer at Hamilton Lane shared with FinanceAsia that the firm will “continue to offer new mintings of tokens on a monthly basis, based on investor interest.”
A range of funds are available on the ADDX platform, but “what is noteworthy about this particular deal is that Hamilton Lane is one of the earliest major private markets firms to allow one of their funds to be tokenised” ADDX’s recently appointed CEO, Oi-Yee Choo, told FA.
With digital securities powered by blockchain and smart contract technology helping transform the capital markets in a profound way, Choo noted that individual investors can make use of such innovation to diversify their portfolios.
“In the face of public market volatility arising from inflation, rising interest rates, and the war in Ukraine, investors can benefit from an allocation to private market investments, which have been shown to reduce volatility while enhancing returns,” she shared.
First launched in May 2019, the GPA fund offers investors exposure to global private markets, including fully-invested direct equity and direct debt, as well as a secondaries portfolio that according to Shaw has no J-curve (a trendline that shows a short period of initial loss, followed by significant upward gain).
Open-ended funds are favoured typically by long-term investors due to their indefinite life and income-generating asset portfolios. Often considered credible options for conservative investors or long-term-focussed insitutionals such as Asia’s significant base of pension funds, they offer a perception of increased liquidity compared to their closed-ended counterparts, given that LPs can request their interests to be redeemed by the fund on a periodic basis.
A report by Torys adds that theoretically, these types of fund offer exposure to a more diversified portfolio of assets, as during their indefinite life, they can hold a greater number of investments than most closed-ended strategies, and they have more flexibility to tailor the timing of their investment acquisitions and dispositions, based on prevailing market conditions.
Confirming that LPs (limited partners) participating in the fund through the ADDX platform will have the same rights as those pursuing traditional channels, Shaw shared that currently, banks, wealth managers, HNWI and family offices comprise the vast majority of GPA’s investor base.
Geographically, over half of the fund’s investors come from Asia, with European and Canadian investors making up the remainder.
“GPA was created to give investors who previously had no or limited access to private markets an opportunity to access this asset class in a simple way. This was achieved by mitigating or eliminating many of the traditional obstacles (liquidity, capital calls/distributions or high minimum investment amount) that typically come with investing in the private markets,” he said.
He added that, while the long-term target net return for the fund in USD is 10-12%, since inception the GPA fund has outperformed this, achieving an up to 16% annualised net return. As of 31 January 2022, the fund had assets of more than $1.845 billion.
Operating on a private, permissioned blockchain that is regulated by Singapore’s Monetary Authorityof Singapore (MAS), ADDX offers issuers access to a larger pool of capital than is possible through traditional fundraising means. Providing a lower barrier to entry, the platform enables lower fundraising thresholds and issuances can be executed at lower administrative costs.
Speaking to FA’s sister publication, CorporateTreasurer last month, Choo shared her ambition to grow the ADDX business from a total transaction value in excess of $150 million at the end of 2021, to over $1 billion by 2023. If successful, the achievement will deem the private digital exchange as Asia’s largest.
“We expect to grow the team from 90 to 120 this year. We have in our pipeline several exciting products and business lines to launch this year. This includes deals with other world-class issuers like Hamilton Lane, as well as our corporate and institutional service, which we expect to launch formally in the coming weeks.”
