iSTOX the blockchain tokenization platform, announced that its platform tokenized private equity bonds issued by Astrea VI. The Astrea bonds are based on a diversified portfolio of private equity and were issued by a subsidiary of Azalea Group, which is indirectly wholly owned by Temasek, the state-backed investment firm.
The key benefits cited through the tokenization are the lowering of issuance denominations to US$20,000 as opposed to $200,000 for Class B bonds.
Using smart contracts also enables the automation of otherwise manual processes during issuance, distribution, and post-sale, including corporate actions such as coupon payments. Hence by reducing costs, it’s possible to lower the bond denominations and a larger number of investors can participate. Investors can now trade the tokens on iSTOX’s exchange.
Another potential benefit of tokenization is greater transparency into the underlying assets, but that was not mentioned in today’s announcement.
The specific tranche of bonds that were tokenized were higher risk ones targeted at accredited investors. The lower risk Class A-1 private equity bonds are targeted at retail investors and were not part of the tokenization. The portfolio consists of buyout funds (81%) and growth equity funds (19%).
“Like Azalea, iSTOX aims to democratise the private markets and ensure the benefits of private equity and other private asset classes are spread more equally among smaller investors,” said Oi Yee Choo, Chief Commercial Officer of iSTOX. “Studies have shown that global private equity averaged returns roughly double to that of global public equity over the past 10 years.”
Temasek also indirectly backs iSTOX. The startup’s investors include Temasek subsidiary Heliconia Capital Management, stock exchange SGX, the Japanese Investment Corporation (JIC-VGI), and the Development Bank of Japan (DBJ).