Japan’s sovereign fund joins $50m round in Singapore digital exchange Istox

Singapore-based digital exchange Istox has concluded a US$50 million series A round, bringing on board four new investors, including the venture capital arm of Japanese sovereign investor Japan Investment Corporation (JIC) and the Development Bank of Japan, the firm announced today.

Existing investors including the Singapore Exchange, Temasek subsidiary Heliconia Capital Management, and Japan’s Tokai Tokyo Financial Holdings, as well as Korea’s Hanwha Asset Management, also participated in the latest round of financing.

Istox chief commercial officer Oi Yee Choo / Photo credit: Istox

Istox, which graduated from the Monetary Authority of Singapore’s fintech regulatory sandbox last February, opens access for individual accredited investors to invest in digital private market securities.

The platform does so by allowing the issuance of fractionalized private market securities, including equity, bonds, and funds, and facilitating the secondary buying and selling of securities among investors.

The new funds will go into expanding Istox’s geographical reach and investment offerings. It will roll out private issuances by blue-chip issuers as well as continue with its expansion in China, where it plans to set up a digital securities exchange in the city of Chongqing.

“China is the fastest-growing private capital market in the world. The digital securities exchange we will build in Chongqing will give Chinese investors better access to global private markets [as well as] access to global capital,” Istox chief commercial officer Oi Yee Choo told Tech in Asia.

Last December, Istox listed what it claimed to be the world’s first fund that targets unicorns in the US, Europe, and Asia.

Participation in the private market has largely precluded individual investors by design. Traditional issuances, which rely heavily on manual processes, cannot deal with a large number of investors in a cost-efficient manner. As a result, such investments typically have a high minimum-investment threshold of around US$1 million in order to keep the investor pool small, Choo explained.

Through blockchain and smart contract technology, Istox is able to tokenize digital assets and securities into bite-sized portions, reducing the minimum ticket size of investments to US$20,000 or less.

Private market on a high

Private markets have outperformed public markets in the past decade. According to a report by global investment firm Cambridge Associates, global private equity has returned 13.2% on average, approximately double the returns from global public equity.

Istox joins a growing number of digital exchanges that are looking to capitalize on the surge in private capital all over the world, such as 1exchange and Hg Exchange.

Last month, Southeast Asia’s largest lender DBS launched the DBS Digital Exchange, a members-only exchange that will support fundraising through asset tokenization and the secondary trading of digital assets, including cryptocurrencies.

Unlike many other exchanges that have banking or brokerage partners, Istox sees value in staying neutral. “We are not linked to one investment bank or one private bank [and] are open to working with any issuer or investor, including investment banks and private banks,” Choo said.