Fintech startup ADDX offers retail investors access to pre-IPO deals, and private equity via security tokens

ADDX, a fintech platform backed by a unit of Temasek and Singapore Exchange, said that blockchain technology helps individual investors bet on potential unicorns by making it possible to own a piece of a fast-growing company for much less than Tesla’s base cost. .

The volatility in the global stock market means that more companies are choosing to stay private for longer, as the world’s largest IPO venues, including Hong Kong and Nasdaq, are in rough patches. Funds raised via IPOs are down 90 percent year-to-date in both markets, according to Refinitiv data.

This has sent individual investors further afield in pursuit of returns, in the vast private market of $8 trillion. The field has traditionally attracted money from institutional players such as sovereign wealth, pensions and endowment funds, according to Oi-yee Choo, CEO of a Singapore-based startup.

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“Traditionally, private banks require at least $1 million from an individual client if they want to go into a hedge fund or a private equity fund,” Zhou said. “But with blockchain, our platform can now get allocations on their behalf, cannibalize them and distribute them online across multiple clients.”

ADDX CEO Oi-yee Choo. Photo: Handout alt = ADDX CEO Oi-yee Choo. Photo: Charity>

She said that Blockchain has made unicorn ownership and pre-IPO bonds more accessible to everyone. The technology splits these massive assets into $10,000 to $20,000 — less than the Tesla Model 3, which starts at around $45,000 — in the form of security tokens that can be traded, registered, and settled on a blockchain ledger.

This month, ADDX listed the fund product of funds operated by Fullerton Fund Management, a subsidiary of Temasek, as one of 20 tokenized and ETFs available on its platform.

The fund, which targets 8 percent to 12 percent of annual return over its seven-year life, will invest in up to eight private equity and trust funds chosen from among more than 20,000. Choo declined to comment on the final size of the fund, but said that Fullerton only distributed a portion of the fund’s fund through security tokens.

Last year, ADDX spent less than $1 million to buy a small stake in Black Sesame Technologies, which is developing artificial intelligence-based technologies and chips for autonomous driving, with electric car maker Nio and smartphone giant Xiaomi among its early backers.

The stake, sold from the asset manager, is the first pre-IPO unicorn deal ADDX has tokenized. Chu said ADDX is exploring sourcing more pre-IPO deals to code it.

Individual investors must meet specific regulatory requirements to show their suitability for high-risk products before they can invest in such platforms. In Hong Kong, this means “professional investors”, or an individual with a portfolio of at least HK$8 million under Hong Kong securities law.

Private banks may also prefer to keep their manager selection and due diligence processes in-house, rather than outsourcing to third-party platforms, said Garth Bregman, head of APAC investment services at BNP Paribas Wealth Management.

“Our offerings typically take into account our own home view of a topic, strategy, or geography,” Bregman said. “Then we choose the best directors who deal with these topics. So we might not pick a director just because they’re in a fundraising cycle.”

Singapore’s Temasek Holdings is a supporter of ADDX. Photo: Reuters alt = Singapore’s Temasek Holdings is a supporter of ADDX. Photo: Reuters >

Data from Bain & Co showed that returns from private equity have outperformed equity markets recently, with the average net internal rate of return in 2021 reaching a 10-year high of 14.2 percent. The MSCI All-Asian Index except Japan, which covers stock markets in 10 countries in the region, gained 1.1 percent last year.

Today the bulk of the market is in the hands of institutional investors. But this is likely to change as technology lowers barriers to entry. Individual investors will provide $1.2 trillion in capital commitments to private equity funds by 2025, or 10.6 percent of the total capital these funds raise, up from 9.2 percent at $493 billion in 2020, according to a recent report from Boston Corporation. Consulting. and iCapital.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative audio report on China and Asia in over a century. For more SCMP stories, please explore the SCMP app or visit Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. all rights are save.

Copyright (c) 2022. South China Morning Post Publishers Ltd. all rights are save.

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