Corporate Finance, DeFi, Blockchain, Web3 News
Fintech, DeFi, Blockchain, Web3 Daily News by Finyear

Interview | Oi-Yee Choo, Chief Commercial Officer of ADDX

ADDX is a private market exchange backed by Singapore Exchange (SGX).

Could you introduce yourself briefly?

I joined ADDX as Chief Commercial Officer at the start of 2020. Our mission is to democratise private market investing. In my current role, I am constantly on the lookout for new issuance deals while at the same time growing our base of individual, corporate and institutional investors. My expertise lies in the capital markets, where I have more than 20 years of experience. Before ADDX, I was Head of Investment Banking at UBS Singapore. Prior to that, I had also worked at Morgan Stanley, Nomura and Citigroup.

What is ADDX? How is it different from other financial institutions?

ADDX is a digital securities exchange focused on using technology to help a larger segment of accredited investors access private market products such as pre-IPO equity, bonds as well a range of funds (PE, VC, real estate, private credit and hedge funds).

Traditionally, the private markets have been designed for institutional capital and ultra-high-net-worth individuals (UHNWIs). The infrastructure for the private markets aren’t equipped to serve a larger group of investors because of high cost, inefficiency and illiquidity.

We aim to change that using digital securities, which are securities that have been issued on a blockchain network. Using blockchain and smart contract technology, we are able to lower the cost needed to raise and invest capital. For end-investors on our platform, this translates into a lower minimum investment size for private market assets – just USD 10,000 instead of the USD 1 million typically needed. We also offer secondary trading services to investors. Our secondary exchange matches and settles trades in a matter of minutes because it is powered by blockchain technology, compared to traditional over-the-counter trades that can take up to weeks to clear.

In addition, our exchange is regulated by the Monetary Authority of Singapore, which means we are held to one of the most respected regulatory standards in the world. Our shareholders include Singapore Exchange (SGX), Temasek subsidiary Heliconia Capital, and Japanese heavyweights such as Tokai Tokyo Financial Holdings, Japan Investment Corporation and the Development Bank of Japan.

How does the technology work?

Using smart contract technology that stores data on our immutable private blockchain, ADDX tokenises multi-asset securities such as private equity and venture capital funds, enabling fractional ownership. This eradicates manual processes that traditionally made it impossible to serve large numbers of smaller investors in a commercially viable way.

With blockchain, all records are constantly accurate and up to date – and there is no need to reconcile transactions across multiple ledgers or computer systems. We can also use the chain to automate processes throughout the lifecycle of a security. Using bonds as an example, when a coupon payment comes in, the chain can be instructed to calculate immediately who owns the bond, what the correct coupon rate is, and how much fiat dollar tokens be paid into the wallet of the investor. This is quite different from what happens in a traditional custodial bank or depository, where there is often a large team of employees with spreadsheets, doing calculations and checks before they execute payments.

Who is your target audience and what do they need to know before they invest on the ADDX platform?

Our platform is currently open to accredited individual and institutional investors in any country except the US. We primarily target high-net-worth individuals (HNWIs) who are not well-served by private banks and other financial institutions. These tend to be HNWIs with a net worth between USD 2 million and 20 million. This segment of investors is usually not shown many private market products because the USD 1 million minimum investment in a hedge fund or private real estate fund, for example, would make up too large a share of their portfolio.

Our advice to clients is, first and foremost, to develop a good understanding of these private market investments or alternative assets. It is often quite a new space for many investors because it was previously inaccessible to them. Investors should always take the time to learn about the underlying asset as well as the way the financial product is structured. Do you understand, for example, what private equity is or what private credit is? And what is the difference between an open-end fund and a closed-end fund?
Our belief in investor education is what drives ADDX to commit significant resources to producing content that investors can access across various mediums – videos, explainer articles and webinars that help investors grasp vital concepts related to the private markets.

Why did you decide to switch from investment banking to a fintech start-up?

In the later part of my time at UBS, I saw an increasing share of business shifting from traditional IPOs towards the private markets every year. These were high-quality investments but they could not be accessed by nearly all individual investors, including middle-class, mass affluent investors. This group forms a sizeable proportion of investors in developed countries today. ADDX’s technology excited me because I could sense its immense potential. If we could gather all the important ingredients – not just the technology, but also the legal, regulatory and commercial aspects of the exchange – we could bring about profound change in the market and benefit millions of investors worldwide.

What are some of ADDX’s goals and priorities this year?

At ADDX, we aim to offer investors a good mix of investment opportunities by asset class and geography, and with a steady deal flow throughout the year. This approach is the most effective in helping investors build a diversified portfolio that is resilient under a variety of economic conditions.

In 2022, ADDX will offer a wider range of investment products. To complement the many closed-end funds we have already listed, we are likely to launch more open-end funds, including private equity, private credit and digital asset funds. Investors can also expect more global PE managers with strong track records to come on our exchange with compelling products. We are optimistic that we can continue to expand our base of investor clients at a healthy pace, building on the success of 2021, when the number of investors grew by around 120%.

Mardi 25 Janvier 2022