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Hamilton Lane Becomes First Wealth Manager to Launch Fund on Solana Blockchain
With more than $900 billion in assets under management, Hamilton Lane is one of the world’s largest alternative asset investing firms. On Tuesday, it announced the launch of a private credit bottom on Solana blockchain. Investors can now access the firm’s Senior Credit Opportunities Fund, or SCOPE, via the network.
To do this, Hamilton Lane has partnered with Libre, a Web3 protocol for issuing and distributing funds on-chain. Libre is a joint venture between WebN Group, hedge fund Brevan Howard, and Nomura’s cryptocurrency firm Laser Digital.
SCOPE’s tokenization offers an opportunity to broaden Hamilton Lane’s distribution by accessing “very affluent, crypto-native” traders, Libre CEO and founder Dr. Avtar Sehra told Fortune.
“A new audience”
Libre serves as the underlying infrastructure, connecting tokenized real-world assets, or RWA, to users. Libre enables accredited, professional, and institutional investors on networks like Solana to directly access “high-level funds on-chain in a fully compliant manner, as well as ancillary services for secondary trading and secured lending where available,” the companies said in a joint statement. According to Libra’s Sehra, Solana’s “low latency and throughput capability” makes it an attractive network for tokenization.
Until now, the closest Solana users could get to tokenized funds was through Ondo Finance, which tokenizes U.S. Treasuries. Ondo has launched yield-bearing securities USDY AND USE on Solana, the latter supported by 95 million dollars Black rock USD Institutional Digital Liquidity Fund (BUIDL). However, this will be the first institutional fund launched directly on Solana.
This isn’t Hamilton Lane’s first foray into the blockchain world, having previously tokenized SCOPE and an equity fund via the Securitize digital securities issuance platformOf those, Hamilton Lane is “very proud” of the inflows it’s seen so far, Victor Jung, head of digital assets, told Fortune. But today marks its first attempt at Solana and its first attempt at tokenizing collateralized loans.
“This is for the decentralized finance natives. We believe this is just the beginning of a part of the financial asset class that will be available to a new audience with a different risk-return profile,” Jung said.
What are tokenized RWA?
Tokenizing RWAs means bringing virtually any asset class (cash, real estate, securities, private credit, art) onto a blockchain. Tokens are minted to digitally represent assets 1:1 and are stored and traded on public ledgers. The hope is that this will create greater liquidity, transparency, and accessibility. Proponents argue that it will modernize and democratize conventional financial markets.
“We believe the next step forward will be the tokenization of financial assets, and that means every stock, every bond. […] will be on a single general ledger,” BlackRock CEO Larry Fink told Bloomberg TV in Marchwhile also announcing the company’s tokenized fund, BUIDL.
This year also saw the debut of a startup called Superstate whose funds are based entirely on the tokenization of RWA, including Treasury bills.
The boom in private credit
First appearing in the 1980s, the private credit sector It was reborn after the 2008 financial crash, and has since surged in popularity. It is thought to be worth more than $3.14 trillion, according to JPMorgan estimates.
Private credit involves nonbank lenders, such as private equity funds or alternative asset managers, providing loans to small and medium-sized businesses, which are often highly leveraged and typically cannot borrow in corporate bond markets. Investors in private credit funds receive relatively high returns to compensate them for holding assets that can be harder to sell than traded loans. It also is a way for investors to hedge against price swings in public markets and gain exposure to a broader spectrum of companies beyond those listed on public exchanges.
SCOPE, launched in 2022, is aimed at investors seeking “potential safety and return in both favorable and adverse market conditions,” according to Hamilton Lane websiteWith approximately $556 million in AUM, it offers an annualized return of 10% for USD investors.
Why Tokenize RWA?
One advantage is the “books and records” side of things, Nick Ducoff, head of institutional growth at the Solana Foundation, told Fortune. In off-chain markets, the beneficial owner of a security is tracked by the transfer agent. Once the transfer of ownership is recorded by the agent, the actual transaction happens a day later. But on-chain, ownership and value transfer happen immediately, simultaneously, and are publicly reported.
A second benefit is that, on-chain, tokenized RWA holders can then exchange them for a variety of other tokens, not just fiat currencies, on secondary markets, increasing liquidity.
For example, USDY, a tokenized note from Ondo, is backed by short-term U.S. Treasuries and demand bank deposits. “You can literally trade any token listed on a decentralized exchange for USDY. You can trade your WIF for USDY and all of a sudden you’re getting a Blackrock iShares Treasuries Fund, for your WIF, BONK, SOL, or USDC, right?” Ducoff said, citing the abbreviations of several popular memecoins.
While SCOPE is a fund for high-income investors, some have expressed skepticism about the demand for tokenized financing platforms.
Tokenized private credit issuers like Maple and Centrifuge are “trying to sell to crypto natives, which I think is very difficult because sometimes these assets have long lock-ups,” Krupetsky, senior director of corporate development for institutions and capital markets at Ava Labs, told Fortune Morgan. Some crypto investors don’t want to do KYC and can access a 700% return profile on a memecoin, compared to a 12% return over two years, he added. He noted a “product market fit mismatch” between those being targeted and the underlying asset itself.