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  • 🅰️🅰️ Moody’s on Tokenization: Breaking Down Their Report

🅰️🅰️ Moody’s on Tokenization: Breaking Down Their Report

🍷 New Offering: Wine Capital Wine Fund

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Goooood Morning, Rainmakers! ☀️

As always, we have two captivating topics for you to dive into:

1️⃣ 🅰️🅰️ Moody’s on Tokenization: Breaking Down Their Report

2️⃣ 🍷 New Offering: Wine Capital Wine Fund

Without further ado, it's time to…

Get Liquid 💧

Your First Captivating Topic of the Week

🅰️🅰️ Moody’s on Tokenization: Breaking Down Their Report

At the beginning of the year we saw rating agency Moody’s give FundBridge Capital’s tokenized fund, SGD Delta, a AA rating even though the underlying asset is rated AAA. This past week we saw them come out with a report clarifying their stance on tokenization which perhaps helps understand their reasoning regarding the lower rating.

Jumping right into the report, Moody’s does acknowledge how much tokenized funds have grown in traction, citing examples such as Franklin Templeton. They also recognize technological advantages, referring to tokenized BlackRock money market fund units used to post margin on JPMorgan’s Tokenized Collateral Network (TCN) with Barclays.

Harry Potter Lol GIF by Sky

That being said, a common theme in other issuers has become a risk-factor for the rating agency which is

Fund managers and administrators often find themselves handling operations such as token issuance and redemption, maintenance of an on-chain investors’ register, and whitelisting wallets in compliance with KYC and AML checks. These are areas where they might not have extensive experience

Moody’s “Growing adoption of tokenized funds raises efficiency but brings technology risks” Report

This was the main proponent of SGD Delta’s slightly lower rating. The fund was issued on Standard Chartered’s Libeara platform, a relatively new entrant, coupled with FundBridge Capital’s limited track record managing these kinds of assets.

Many service providers that are needed to complete a tokenized transaction have limited track records, increasing the risk that payments could be disrupted if there is a bankruptcy or technological malfunction.

Moody’s “Growing adoption of tokenized funds raises efficiency but brings technology risks” Report

This refers to their preference of the technology provider, fund manager, fund administrator, and custodian be independent and replaceable in the event of bankruptcy.A couple other arguments Moody’s makes revolve around the use of public blockchains and needing audited smart contracts. Let’s remember that some more traditional issuers have used permissioned environments for their tokenized assets, limiting risk.

Although the tokenized SGD Delta fund received a slightly lower rating (AA vs. AAA), Moody’s is making fair points, both from tech and issuer standpoints. We also have to recognize tokenization is still young compared to the incumbent capital markets infrastructure. The advantages are undeniable, which Moody’s delve into, but there seems to be a need for further maturity.

Regardless, a major rating agency paying attention to on-chain real world assets is a positive sign for the industry and we can hope their analysis evolves into an even more positive one as we continue bringing assets on-chain.

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Marc Powers, Esq. is an ex-SEC Enforcement Chief, now law professor at Florida International University, and advisor at Security Token Group. Join us as we break down this historic news!

Your Second Captivating Topic of the Week

🍷 New Offering: Wine Capital Wine Fund

Who said you can’t invest in wine? You definitely can! Wine Capital Fund by WIVX Asset Management just announced they’ll be tokenizing with Oasis Pro.

The issuer just launched their closed-end private equity fund, meaning the tokenization will happen subsequently. This isn’t uncommon, many assets have started out in their “analog” formats before coming on-chain.

Grab a glass and let’s dive into the details

Like any alternative investment, wine isn’t exactly easy to invest into or exit. That being said, alternative investments such as wine tend to outperform traditional investment opportunities like stocks and bonds so for some its worth the friction in participating. The following graph shows wine’s performance vs. the Nasdaq over a 22-year period.

Source: Winecapital.fund

What if we could remove some of that friction, lower investment minimums, and provide liquidity optionality? That’s what Wine Capital Fund is looking to accomplish with Oasis Pro as the tech provider and prime broker. Here’s some information on the opportunity:

  • Target Fund Size: $150M

  • Minimum Investment: $25K

  • Sector: Investment Quality Wine

  • Holding Period: 2-4 years

  • Investment Products: Wine 85%, Whiskey 10% in cask

  • Fees: 2 & 20

The fund will acquire investment-grade wines globally, with an initial focus on France (Bordeaux, Burgundy and Champagne) and Italy (Tuscany). They then hold that wine in proper storage for a set amount of time, allowing for appreciating in value before selling and returning gains to investors.

Once this fund starts trading you can expect to see it tracked on STM.Co. Until then, feel free to check it out and see if you’d like to participate.

This is not financial or investment advice.

💦 What else is Drippin’

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