In late June Securitize announced a deal with asset manager InvestCorp to tokenize one if its funds. InvestCorp has $52 billion in assets under management (AUM), a little less than one of Securitize’s other clients, BlackRock. However, InvestCorp provides a great example of fractionalization and the so-called ‘democratization’ of investments in private equity.
That doesn’t mean that the average mom and pop can invest in private equity. After all, it’s not a liquid asset. So investment is restricted to qualified investors. However, with a starting ticket of $20,000, it’s a far cry from the typical private equity investment.
Tim Osnabrug, a partner in Investcorp’s Strategic Capital Group (“ISCG”), told the Private Funds CFO magazine that the amount “is substantially lower than typically is required for investors when they come directly into our funds, which is one of the things we find particularly interesting in this partnership because it opens up to a broader array of investors.”
Plus, the investments are in a feeder fund for its latest GP stakes fund. This is similar to investing in a fund of funds, but likely safer for two reasons. Firstly, it’s a GP stakes fund which buys a small portion of several private equity general partners. Hence, it’s diversified across asset managers and asset classes. That makes it well suited for entry level investments.
Secondly, the fund does not invest directly in other funds. It’s investing in the general partners that manage the funds. General partners typically earn 2% annual management fees based on the fund AUM, no matter how well the fund performs. They also earn a cut of the profit of the funds as the asset values increase. This carried interest is typically around 20% and can offer significant upside.
Investors are locked in for a one year period after which they can sell the tokenized fund units to other Securitize investors.
Securitize and BlackRock
Meanwhile, BlackRock selected Securitize as its tokenization partner for its first digital money market fund, BUIDL, which reached $500 million in assets under management within four months. The asset manager also invested in Securitize’s latest funding.
