Global alternative investment manager Investcorp has teamed with a Singapore-based digital securities exchange to tokenise ownership of five US multifamily apartment buildings.

The tokens will exist on ADDX’s private, permissioned blockchain network, based on the Ethereum protocol.

The Sunbelt Multifamily Fund is projecting a cash yield of 7.5 per cent, distributed quarterly, and a target return of nine per cent net internal rate of return.

It consists of a portfolio of five apartment complexes totalling 2,200 units in the fast-growing states of Texas, Arizona and Georgia.

ADDX chief commercial officer Oi Yee Choo says that that the efficiency of digital securities meant that investors on ADDX could take part in the fund with a minimum of just US$20,000 – significantly less than the US$500,000 typically required for private real estate funds.

“When we look at the way sovereign wealth funds invest, alternative assets make up a significant and growing share of their holdings because the blend of private and public investments helps to maximise long-term returns,” Ms Choo said.

“With digital securities enabling fractional sizes, accredited individual investors can now, for the first time, take a similar approach. There is fairer access to economic growth.”

Blockchain efficiency

By using blockchain, actions such as managing the fund’s capitalisation table (i.e, its ownership list), dividend and coupon payments and secondary trading become digital and self-executing, ADDX said.

The Sunbelt fund raised US$150 million from global investors, who now have the option to cash out ahead of maturity by selling on the ADDX exchange.

Regulated by the Monetary Authority of Singapore, the ADDX exchange is only open to wealthy and institutional investors, but people from all over the world (except the US) can invest.

Investcorp has US$37.6 million in assets under management and has been expanding its Asia footprint, investing about US$500 million in the region over the past 18 months

The asset manager said it would explore tokenising more alternative investments under its new partnership with ADDX, which is backed by Temasek subsidiary Heliconia Capital and Japan state-backed investors JIC and DBJ.