Private market exchange ADDX has enabled fractional access to a private credit fund with more than US$1 billion in committed capital, reducing the fund’s minimum investment size for individual accredited investors from US$5 million to US$20,000. The move helps diversify the investor base of private credit funds, which have traditionally been designed to serve institutional capital. This is also the first private credit fund to be tokenized on the ADDX platform.

The lowering of the investment threshold was made possible through the issuance of security tokens with an exposure to the SeaTown Private Credit Fund. Also known as digital securities, these tokens are more efficient to administer because they make use of blockchain and smart contracts to overcome manual processes at different stages of their life cycle – including custody, ownership tracking, fund earnings distribution and secondary trading. The use of security tokens also eliminates the need for multiple intermediaries, which brings down costs further for both issuers and investors.

Fund manager SeaTown is a wholly-owned subsidiary of Seviora Holdings, and is indirectly owned by Temasek Holdings. SeaTown has been investing in private credit since 2012, with US$2.1 billion of investments to date. In all, it manages five funds with US$6 billion in total assets under management as of June 30 2021.

Private credit funds are funds that make direct loans to companies or buy such loans from the secondary market. Technology is enabling the entry of non-institutional capital at a time of significant expansion for private credit – also known as private debt – as an asset class. According to Preqin, private debt AUM more than doubled in the past decade, to US$848 billion in 2020 from US$315 billion in 2010. Preqin is projecting private credit AUM to increase further to US$1.46 trillion by 2025.

SeaTown Private Credit Fund is raising capital from external limited partners for the first time. The close-ended, four-year fund is focused on extending private credit to companies in the Asia-Pacific region.  To date, the fund has deployed more than US$500 million in investments. Over half of the fund’s portfolio of deployed investments is in secured loans or bonds, while the remainder is in second-lien loans and preferred shares. The offering on the ADDX platform was completed last month, with individual accredited investors subscribing to US$7 million in tokens. The tokens are now listed for secondary trading on the ADDX exchange, which allows other accredited investors to take part.

Oi Yee Choo, ADDX chief commercial officer, says: “SeaTown is a distinguished name in the world of private capital. SeaTown’s link to the Temasek group of portfolio companies and its extensive deal sourcing network across the Asia-Pacific region enable the fund manager to be more selective in executing deals with a good risk-return profile.”

She adds: “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.”