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ADDX tokenises private credit fund backed by Temasek

By Mensholong Lepcha

03:55, 22 November 2021

An illustration of the lending concept
Lending concept illustration – Photo: Shutterstock

Singapore-based private market exchange ADDX has tokenised a private credit fund by Temasek-owned SeaTown reducing the fund’s minimum investment size from $5m  to $20,000.

The exchange said this was the first private fund to be tokenised on its platform and this latest development expanded the universe of potential investors into private credit.

“It is not feasible for an investor with a net worth between US$2 million and US$20 million to enter a private credit fund with a minimum ticket size of US$5 million. But at a US$20,000 minimum, that same investor is able to take part in this previously-inaccessible asset and benefit from the enhanced portfolio diversification,” said Oi Yee Choo, chief commercial officer of ADDX in a statement.

Indirectly owned by Temasek

ADDX said SeaTown Private Credit Feeder Fund LP is a close-ended, four-year fund focussed on extending private credit to companies in the Asia-Pacific region.

Fund manager SeaTown is indirectly owned by Singaporean investment firm Temasek Holdings. It manages five funds with $6bn in total assets under management, as of 30 June.

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“In the aftermath of the Great Financial Crisis of 2008, the growth of private credit funds has accelerated in part because traditional lenders such as banks have taken a more conservative stance on lending. Amid this expansion, we can see the private credit fund space maturing and attracting a deep pool of professional talent,” said Choo.

Disrupting the multi-trillion-dollar bond market

Earlier this month, Choo told Capital.com that the fractionalisation possibilities offered by token technology powered by blockchain is set to disrupt the global bond market.

“ADDX sees the bond market as increasingly disruptive with digitisation because it's so inefficient today. The minimum size you raise through a bond is roughly $250m. And for a lot of the smaller companies that's too big and too expensive,” Choo told Capital.com.

On Monday, ADDX said the lowering of minimum investment size for its first tokenised private credit fund will help diversify the investor base of private credit funds, which have traditionally been designed to serve institutional capital.

Read more: Token technology set to disrupt 8trn global bond market

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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