Today investment manager Hamilton Lane announced a deal with digital asset securities firm Securitize, to tokenize three of its funds. Hamilton Lane has $835 billion in assets under management and the funds to be tokenized include unlisted equities, private credit, and secondary transactions.
The news follows the announcement last month that Securitize would use blockchain to tokenize part of KKR’s health Care Strategic Growth Fund II.
Historically Hamilton Lane funds have been limited to institutional investors. New tokenized feeder funds will be created in Q4, enabling a broader investor base to access the funds. Clients will still need to be accredited, which means a net worth of more than $1 million or income above $200,000.
However, from an asset manager’s perspective, that group is a massive market. And one that can be clearly measured.
According to the Federal Reserve’s 2019 Survey of Consumer Finances, the top 10% of families have incomes above $236,000. This group owns 71% of aggregate personal wealth or $68.4 trillion in assets. The figure rises to $82 trillion if you include defined benefit pensions. Not all of that is going to be invested in funds. Pensions, real estate and business ownership make up significant proportions of wealth. Still, these accredited investors held $22 trillion in financial assets in 2019, excluding pensions.
“This collaboration with Securitize is our latest step toward enabling access to the strong returns and performance opportunities generated within the private markets space for a newer set of investors, while increasing usability and transparency through the use of blockchain technology,” said Victor Jung, Head of Digital Assets at Hamilton Lane.
Hence, converting funds into security tokens enables these private investors to place money in assets previously only accessible to institutions. It reduces the costs of issuance and administration, and enables fractional ownership.
Securitize has multiple subsidiaries responsible for different parts of the process. The company’s digital transfer agency performs tokenization. The feeder funds are managed by Securitize Capital, the digital asset management arm. And its broker dealer Securitize Markets enables secondary market trading.
While the tokenization of funds has been widely discussed for years, and multiple blockchain platforms have been developed, this year sees the start of some momentum. In other jurisdictions, companies such as ADDX are active in Singapore, and the UK, the top 5 asset manager, abrdn recently made an investment in the digital asset exchange Archax.
