By Oi-Yee Choo, Chief Executive Officer of ADDX
Crypto winter is blockchain summer.
This is the strong conviction as well as one of the key findings in a report by global management consultancy BCG and ADDX, published in September this year.
The crisis in the crypto world is, if anything, prompting capital to stay focused on viable blockchain use cases that could have a transformative impact on the real economy – including applications like tokenised securities, cross-border payments and central bank digital currencies.
Zeroing in on tokenised assets, the BCG-ADDX report forecasts that the space will grow 50 times by 2030 into a US$16 trillion business opportunity, which is 10% of global GDP.
Titled “Relevance of on-chain asset tokenization in ‘crypto winter’”, the report points to five indications that tokenisation could well be on the cusp of widespread adoption globally:
- Trading volume is increasing
- Stakeholder sentiment is strengthening
- Governments are recognising and regulating tokenised assets
- More asset classes are being tokenised
- The pool of active blockchain developers is growing
As an early adopter of blockchain technology, ADDX has been at the forefront of this revolution. We believe blockchain will bring about fundamental change in the financial services and capital markets – and we are encouraged that BCG examined the trend in depth and came away with a bullish opinion as well.
In his August speech, “Yes to Digital Asset Innovation, No to Cryptocurrency Speculation”, delivered just before the BCG-ADDX report, Monetary Authority of Singapore Managing Director Ravi Menon expressed a similar view, arguing that it is the “innovative combination of tokenisation and distributed ledgers that offers transformative economic potential”.
Mr Menon said specifically that asset tokenisation was among the use cases of blockchain that can “potentially facilitate more efficient transactions, enhance financial inclusion, and unlock economic value”.
ADDX investments were focused on income and capital preservation over the last 3 months
In the third quarter, we also added other high-quality products to our shelf. At a time when investors remain very concerned about volatility and a bear market, we launched options aimed at allowing investors to generate income and to preserve capital.
First, we listed a private credit fund by Helicap Investments, which counts Temasek-backed Tikehau Capital as one of its shareholders.
The fund manager makes loans to Southeast Asian digital lenders, especially those focused on micro loans – for example, an entrepreneur in Jakarta who needs capital for a delivery motorcycle. The fund’s success is built on proprietary technology that is able to analyse millions of data points, detailed to the level of how well each microloan is doing, in order to assess the creditworthiness of the digital lenders that borrow from it.
Having disbursed over USD 100 million in loans since 2018, the fund manager’s flagship fund – Helicap Fund I – has achieved a net annualised return of around 10% and a track record of zero defaults by microlenders.
More broadly, private credit is an asset class that more investors find compelling in the current rising rate, bear market investment environment.
Private credit generates a regular income stream and tends to have a lower risk-return profile than venture capital or private equity. If the private credit fund has a strategy of disbursing shorter-tenor loans, returns from the fund are more likely to keep up with rising interest rates.
Another product we launched was ADDX Earn, a cash management tool that helps investors earn an interest rather than let their capital sit idle in their accounts.
We launched ADDX Earn because we could see that many investors on ADDX had undeployed funds in their accounts. Some may have transferred the money into ADDX early, so they don’t miss out on an upcoming investment opportunity. Others may have had an earlier investment mature or returns distributed to them from an existing investment.
Whatever your reason happened to be for having uninvested capital, we wanted to provide an investment option that would cover these gap periods.
The first two funds we launched under ADDX Earn were the LionGlobaI SGD Enhanced Liquidity Fund and LionGlobaI USD Enhanced Liquidity Fund. The two funds are invested in high-quality debt instruments with weighted average credit ratings of “A”. Interest accrues to investors daily, therefore fulfilling the need for short-term yield.
Private markets needed for true diversification
Investing in public markets this year has been fraught with uncertainty and volatility. As the US and Europe raise rates to combat inflation and China struggles with Covid lockdowns, the prospects for a deep global recession loom large. The S&P 500 has declined 17%, year to date. The bond market too is facing one of its worst years on record.
Increasingly, wealth managers agree that a traditional 60/40 portfolio is no longer capable of providing investors the diversification they need. The consensus is shifting towards an 80/20 portfolio – 80% in public markets, 20% in private markets.
It is just as well that this changing environment coincides with the rise of tokenisation, as projected by the BCG-ADDX report – because tokenisation is the technology advancement that will give individual investors the private market access they previously did not have.
Open your account on ADDX and start investing in the private markets.
ADDX is your entry to private market investing. It is a proprietary platform that lets you invest from USD 10,000 in unicorns, pre-IPO companies, hedge funds, and other opportunities that traditionally require millions or more to enter. ADDX is regulated by the Monetary Authority of Singapore (MAS) and is open to all non-US accredited and institutional investors.
