Private market exchange, ADDX, has announced the tokenisation of Temasek-backed private equity (PE) firm, Fullerton Fund Management’s fund-of-funds on its platform.
Fullerton joins PE peers Hamilton Lane, Investcorp and Partners Group in exploring fund tokenisation which, as recently appointed ADDX CEO, Oi-Yee Choo, explained, allows them to expand their investor base by reducing minimum investment size.
“In addition, because tokenisation reduces manual processes and the need for multiple intermediaries, it is a cost-efficient channel for fundraising…Tokenisation therefore represents a new frontier for funds to expand and grow their AUM (assets under management),” she told FinanceAsia.
Earlier this month, Singapore media stated that KKR was to partly tokenise a fund on ADDX. A source familiar with the matter confirmed with FA the accuracy of these reports.
Other Temasek-backed funds, Mapletree, Azalea, SeaTown are also available on ADDX.
In October last year, ADDX announced a collaboration with UOB bank to digitalise part of Sembcorp’s $496.4 million sustainability-linked bond.
The latest tokenised fund, Fullerton Optimised Alpha, is a closed-end, geographically and strategically diversified fund, targeting annual returns of 8-12% over a seven-year fund life. It will be invested in a portfolio of “six to eight” PE and private credit funds, the announcement explained.
Accredited individual investors on ADDX are able access the fund at a minimum investment size of $10,000, instead of the $250,000 required if they were to invest through traditional channels.
The latest tokenisation indicates that adoption and acceptance is spreading among major PE players, Choo said.
However, the association of tokenisation with cryptocurrencies – through the application of blockchain technology – still acts as a barrier to further adoption of tokenisation by PE funds, she explained.
“As fund managers become more familiar with what tokenisation actually means, how it is a regulated way of issuing and distributing fund units, as well as the potential benefits it could bring to their funds, we expect to see attitudes change very quickly. Indeed, we have already seen receptiveness grow considerably in the past 6 to 12 months.”
On the potential regulatory hurdles, Choo explained that funds may be required, depending on where they are domiciled, to exclude certain groups of investors, or to ensure each limited partner (LP) meets a minimum investment amount.
ADDX works with fund managers to find the appropriate structure for each specific tokenisation project, including pooling individual investors into a single entity if required, Choo added.
ADDX graduated from the Monetary Authority of Singapore (MAS)’s Regulatory Sandbox with a capital markets services licence and recognition as a market operator in February 2020. It has since participated in a total of 30 deals amounting to over $300 million as of the end of April 2022 and expects to have secured a total of 100 deals amounting to $1 billion in transaction value, by the end of 2023.
ADDX is backed by the Singapore stock exchange (SGX); Temasek subsidiary, Heliconia Capital; Japanese venture capital firm, JIC Venture Growth Investments; and the Development Bank of Japan.
