Wealth managers can now introduce more of their end investors to the private investment world through a newly launched institutional service on the ADDX digital stock exchange. Corporate treasuries and family offices can also participate in the space through a corporate service to diversify their portfolios through private market products.
Both services fall under a new business product line called ADDX Advantage. Some of the first institutions to join us as partners include StashAway, Southeast Asia’s fastest growing digital wealth manager, and CGS-CIMB, a leading stockbroker in Asia.
Wealth managers using this institutional service can offer their clients fractional access to private market products, further enhancing portfolio diversification away from public market exposure. This service is intended for brokerage houses, private banks, external wealth managers and multi-family offices. Through a B2B2C model, the service ultimately benefits the wealth manager’s end clients, who may be qualified individual investors or institutional investors.
Currently, wealth managers looking to offer private market products to their end clients must negotiate deals with each issuer separately – a time-consuming process. Being on ADDX means an instant plug-in to a full suite of offerings across multiple asset types. The use of blockchain and smart contracts on ADDX also allows opportunities to be split down to a minimum of $10,000, from the $250,000 to $5 million typically required to go directly to private market issuers. The lower barrier to entry allows end customers to manage risk by spreading their capital across a variety of products.
Depending on the regulatory licenses held by wealth managers, they can choose between two types of institutional services. They can either execute trades and transfer funds on behalf of end investors, or create sub-accounts on behalf of their end clients and allow clients to take control of their own activity on ADDX.
Carol Fong, CEO of CGS-CIMB Group, said: “We believe that investments should be made more affordable for a wider group of investors. This means collaborating with platforms such as ADDX that allow more investors to access private investments previously inaccessible with fractional ownership. It is a beginning of “democratization” of the private equity market to make it more inclusive.
ADDX’s corporate service operates on a B2B model and caters to institutional investors, as well as companies investing their own capital, such as corporate treasuries and family offices. For example, corporate treasuries with excess cash can now benefit from short-term investment instruments that yield a higher yield than bank term deposits. A three-month commercial paper with a yield of 2.3% per annum from ValueMax, listed on the SGX, is currently listed on the ADDX. Family offices, on the other hand, often have longer horizons and more sophisticated investment strategies. They may prefer a wider product range, including opportunities with higher risk-reward profiles. For them, the lower minimum investment sizes on ADDX can help them build optimal portfolios, reducing the handicap they traditionally face due to their smaller pool of investable capital compared to large institutional players like sovereign wealth funds and pension funds.
ADDX CEO Oi-Yee Choo said, “ADDX was founded with a vision of democratizing private markets for individual investors. Our B2C experience has shown us how investors now have the platform to accumulate a diversified portfolio of private markets powered by our technology. We would like to expand our approach to adapting private markets for more efficient access to our partners in the field of wealth management.
Ms Choo added: “Corporate investors and family offices also face serious problems in the market. We had the solutions to these problems, having built an efficient platform for individual investors with a constant flow of transactions. The last mile was developing the technology to serve institutional and commercial investors, which required time and investment because their needs are more complex – ranging from API connections to multi-user access. »
“For ADDX, this latest move represents an important strategic pivot that strengthens the competitiveness of our exchange by expanding and diversifying our investor base. This will allow us to better attract high quality issuers to list on ADDX knowing that there will be sufficient investor demand. As an exchange, our goal is to ensure a critical mass of issuers and investors at the table, so that capital can find worthwhile investment projects, and vice versa. By launching services in the private market for wealth managers and corporate investors, we have taken a big step towards this goal,” she said.
Established in 2017, ADDX uses blockchain and smart contract technology to automate manual processes that have so far made it inefficient to distribute private market securities to large numbers of investors. The efficiency of tokenizing these securities allows ADDX to reduce the minimum investment size to $10,000. Asset classes available on the ADDX platform include private equity, venture capital, private debt, real estate, hedge funds, cryptocurrency funds, and structured products. ADDX has listed 26 transactions to date, working with blue chip names such as Partners Group, UOB, Investcorp, CGS-CIMB, as well as Temasek owned entities Mapletree, Azalea and SeaTown.