Tokenization is becoming an increasingly important trend in the fintech industry, with a global market size of US$2.41 billion. At an annual growth rate of 24.09%, the market is expected to reach US$13.53 billion by 2030, according to a report by US-based research and consulting firm Grand View Research.
Based on blockchain and smart contract technology, tokenization allows individual investors to access assets such as private equity or venture capital, as well as “non-bankable” assets such as painting, by fractionalizing ownership.
Meanwhile, SMEs, the main drivers of the global economy, are increasingly looking to raising funds via private market platforms, which are based on tokenized ledgers. This is a more convenient way to raise capital than through bank debt, which is normally open to bigger establishments with more favourable terms.
SDAX, a private markets investment and trading platform based in Singapore, has taken to tokenization to attract more investors and high-potential enterprises.
The firm last month listed its CR Global UK Social Housing Fund II, a social housing fund registered through CR Global Investments Variable Capital Company. The fund will invest in real estate to meet social housing needs in the United Kingdom.
The second series of the £200M (US$231 million) fund has been tokenized and is available for trading on SDAX's platform, providing coupons of up to 7% per annum and an investment tenure of two-plus-two years.
Raymond Poh, SDAX’s chief executive officer, says tokenization offers more opportunities to both issuers and investors, while providing a fast, secure and cost-effective platform.
“Now we are able to take one ticket size of S$50 million and break it down to as small as S$1,000 per token , depending on what the asset is,” Poh tells The Asset in an interview.
SDAX is focusing on real estate and corporate finance, while attaching great importance to environmental, social and governance (ESG) principles.
“ESG can be a standalone pillar by itself,” Poh says. The firm is working on multiple ESG-related projects such as the social housing fund in the UK and a regenerative agriculture project in the United States.
Another real estate investment deal from SDAX involves acquiring non-performing loan (NPL) packages with property collateral comprising high-end residential units, or commercial assets in major Chinese cities. The Note, managed by Aurous Capital, acquires NPL packages that pass a stringent due diligence process and are priced at a significant discount to their fair value.
The Note will subsequently sell the underlying assets in the secondary market to monetize the discount and generate returns for investors. Despite the current volatility in the country’s property market, the sector remains an important driver of the economy. About 10 million Chinese people are estimated to move to cities each year over the next three to four years, and this wave of domestic migration forms part of the structural demand for real estate in the higher tier cities.
It also actively participates in creating financial training and accelerator programmes with stakeholders in the government, academia and trade organizations.
In choosing which ESG projects to finance, Poh says the firm considers three factors, namely intentionality (exerting a positive impact), return (generating a positive return) and measurability (the benefits are measurable and transparent), in a bid to avoid greenwashing.
SDAX recently announced a partnership with Ownera, a provider of a global inter-trading network based on the open-source FinP2P protocol. This allows the firm to distribute digital securities over the Ownera FinP2P network, for higher liquidity and better access to capital and assets.
Year to date, SDAX has listed S$355 million through its platform, and is planning to list another S$130 million before the year’s end.