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Hamilton Lane Becomes First Asset Manager to Launch Fund on Solana Blockchain
With more than $920 billion in assets under management and supervision, Hamilton Lane is one of the world’s largest alternative asset investing firms. On Tuesday, it announced the launch of a private credit funds on the Solana blockchain. Investors can now access the company’s Senior Credit Opportunities Fund, or SCOPE, through 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 hedge fund Brevan Howard’s WebN Group and Nomura’s crypto firm Laser Digital.
SCOPE’s tokenization offers the opportunity to deepen Hamilton Lane’s distribution, accessing “affluent, crypto-native” traders, Libre CEO and founder Dr. Avtar Sehra told Fortune.
“A new audience”
Libre functions as the backbone infrastructure, connecting tokenized real-world assets, or RWAs, to users. Libre allows accredited, professional, and institutional investors on networks like Solana to directly access “prime funds on-chain in a fully compliant manner as well as ancillary services for secondary trading and collateralized lending, where available,” the companies said in a joint statement. Libra’s Sehra said Solana’s “low latency and throughput capacity” make it a compelling network for tokenization.
Until now, Solana users could most easily access tokenized funds through Ondo Finance, which tokenizes U.S. Treasuries. Ondo has launched high-yield funds Zimbabwe Dollar And OUSG on Solana, the latter being backed by the $95 million Black rock USD Institutional Digital Liquidity Fund (BUIDL). However, this will be the first institutional fund launched directly on Solana.
This is not Hamilton Lane’s first foray into blockchain, having previously tokenized SCOPE and an equity fund. via the Securitize digital securities issuance platform. Hamilton Lane is “very proud” of the cash flow it’s seen so far, Victor Jung, head of digital assets, told Fortune. But today marks its first foray into Solana and its first attempt at tokenizing collateralized loans.
“This product is aimed at decentralized finance natives. We believe this is just the beginning of a part of the financial asset class that will be accessible to a new audience with a different risk/return profile,” Jung said.
What are tokenized RWAs?
Tokenizing RWA means integrating virtually any asset class (cash, real estate, securities, private credit, artwork) into a blockchain. Tokens are created to digitally represent the assets 1:1, and are stored and traded on public ledgers. The hope is that this creates greater liquidity, transparency, and accessibility. Proponents of this approach argue that it will both modernize and democratize conventional financial markets.
“We believe the next step will be the tokenization of financial assets, which means that every stock, every bond […] “The accounts will be on one general ledger,” BlackRock CEO Larry Fink told Bloomberg TV in Marchwhile announcing the company’s tokenized fund, BUIDL.
This year also saw the launch of a startup called Super-State whose funds are entirely based on the tokenization of RWA, including Treasury bonds.
The private credit boom
First appearing in the 1980s, the private credit sector was reintroduced after the 2008 financial crisis and has since grown in popularity. Its value is estimated at more than $3.14 trillion, according to JPMorgan estimates.
Private credit involves nonbank lenders, such as private equity funds or alternative asset managers, making loans to small and mid-sized companies, which are often highly leveraged and typically cannot borrow in corporate bond markets. Investors in private credit funds receive relatively high yields as a reward for holding assets that may be harder to sell than traded loans. In addition, it is a way for investors to protect themselves against price fluctuations in public markets and gain exposure to a broader range of companies beyond those listed on public exchanges.
SCOPE, launched in 2022, is aimed at investors seeking “potential safety and yield in both favorable and unfavorable market conditions,” according to Hamilton Lane websiteWith approximately $556 million in assets under management, 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 takes place a day later. But on-chain, ownership and the transfer of value happen immediately, simultaneously, and are made public.
A second benefit is that on-chain, holders of tokenized RWA can then exchange them for a multitude of other tokens – not just fiat currencies – on secondary markets, thereby increasing liquidity.
For example, USDY, Ondo’s tokenized note, is backed by short-term U.S. Treasuries and bank demand deposits. “You can literally swap any token listed on a decentralized exchange for USDY. You can swap your WIF for USDY, and all of a sudden you have a Blackrock iShares Treasuries fund, for your WIF, BONK, SOL, or USDC, right?” Ducoff said, citing the shorthand for several popular memecoins.
Although SCOPE is a fund aimed at high-net-worth 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 these assets sometimes have long lock-up periods,” Morgan Krupetsky, senior director of business development for institutions and capital markets at Ava Labs, told Fortune. 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, she adds. She’s noticed a “product-market mismatch” between the targets and the underlying asset itself.