Aquarius Fund: A Tokenized Alternative Investment Fund on Liquid, Supported by STOKR

STOKR is a European primary issuance market for digital securities (also known as tokenized securities). In 2022, STOKR became the first issuance platform to be registered as a Virtual Assets Service Provider by the CSSF, the Luxembourg finance service regulator. STOKR provides a one-stop shop for tokenization support that includes comprehensive technical, investment structuring, and compliance support for the issuance of tokenized investment instruments.

Over $60M worth of assets have been funded on STOKR to date and it is perhaps most known as the primary issuance agent for the Blockstream Mining Note (BMN), a 36-month Bitcoin hashrate contract, and the EXO token, an equity investment in MMO Infinite Fleet by gaming publisher Exordium.

The Aquarius Fund

Last year, STOKR began offering the Aquarius Fund, a Luxembourg-based alternative investment fund on the platform. The fund offers a stable, yield-bearing product for corporate treasurers, institutional and professional investors to optimize their cash savings, balance sheet management, and yield-optimization strategies. The fund capitalizes on the imbalance between borrowing and lending rates in the USDt, USD markets, lending these currencies to sophisticated companies in the blockchain industry in exchange for a fixed yield.

The Aquarius Fund aims to simplify the complex process of accessing yields from crypto markets and offers better counterparty risk measures by lending to select blockchain companies that have a significant digital asset portfolio, industry know-how and trading volumes, a strong industry reputation, and/or a regulated status in a recognized jurisdiction.

Fund units can be subscribed to monthly and can be redeemed on a quarterly basis on STOKR and are tokenized and issued on Liquid via Blockstream’s Asset Management Platform (AMP). Instead of holding the fund's units via a custodian bank, investors can self-custody them in their Liquid wallets that support Liquid AMP assets (like Green wallet, SideSwap). The current assets under management of the fund is USD $7.3M. The fund was launched in January, 2022 and is managed by SICOS Securities, a Luxembourg-based asset management entity.

The fund units can only be held by the investors whose AMP IDs are whitelisted, i.e., KYC/AML and investor qualification test is verified. STOKR is the tokenization agent for the Aquarius Fund and the whitelisting process is ensured by STOKR.

Interested investors can find more information on Aquarius Fund by reading the official investment pitch and documents here.

Tokenization: A Solution for the Liquidity Challenges of Traditional Alternative Investment Funds

Unlike publicly traded stocks and bonds, alternative investment funds typically operate in a more closed environment, with limited opportunities for investors to buy and sell their fund units (fund shares) directly with each other. Instead, investors often have to rely on the fund manager to facilitate any transactions, which can be both time-consuming and costly.

Tokenization offers an exciting opportunity for smaller or mid-size alternative investment funds to gain greater liquidity without increasing operational costs significantly. By creating a digital representation of ownership, tokenization enables funds to be bought and sold on a peer-to-peer basis, eliminating the need for intermediaries and reducing transaction costs.

Moreover, tokenized fund units can be stored and settled on the Liquid blockchain, enabling automated record-keeping and smart contract execution that streamline fund management processes and reduce the need for costly intermediaries.

Benefits of Issuing on the Liquid Network

First and foremost, Liquid provides tokenized fund units with a high-level of security and privacy for all the transactions, thanks to Liquid’s Confidential Transactions. For alternative investment funds like the Aquarius Fund, there are many professional investors who are not comfortable with sharing their pseudo anonymous transaction information on-chain.

Compared to other blockchain platforms, Liquid’s transaction fees are generally much lower. This is because the platform is designed to be more efficient than other blockchains, with faster confirmation times and lower processing costs.

The Liquid Network also uses a series of trusted, federated nodes connecting through Tor to facilitate rapid, near-instant confidential transactions. These transactions are finalized within two minutes and are potentially most useful for market-makers, brokers, inter-exchange transactions, and arbitrage. A holy grail for the payment and investment industry.

Advantages of the Asset Management Platform

Liquid opens up its advantages for the capital market industry through the Asset Management Platform (AMP), a platform offered by Blockstream for issuers and asset managers to manage tokenized securities on the Liquid Network. It is built as an API that can be hosted on any token issuing platform (such as STOKR). Companies can leverage AMP to issue, reissue and track security tokens during the entire life cycle. Security tokens are issued as AMP assets and can represent any existing financial instruments like tokenized fiat, crypto assets, attested assets (e.g., gold coins), or completely new asset classes. Thanks to this unique architecture, rules for such AMP assets (security tokens) do not have to be written at the smart contract level, as is the case with Ethereum. Such assets can be easily adjusted via the AMP control panel to allow issuers to adapt to fast-evolving digital asset regulations while giving them a clear view of how these assets have moved since their issuance.

Lastly, AMP’s underlying security, which is based on the Bitcoin blockchain. Liquid Network has been developed on the proven Bitcoin codebase; a framework that has proven to be very difficult for hackers to get around.

Explore STOKR and Tokenized Securities

For further information about STOKR, the Aquarius Fund, and to learn about the business opportunities of tokenization, co-founder Arnab Naskar is giving an in-depth look this Wednesday, April 19, into the Aquarius Fund case study and will be fielding questions live. You can RSVP here.

For additional information connect with the community on the official STOKR and Liquid Telegram channels.

Disclaimer: The information above has been prepared solely for informational purposes only. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities. Full terms and conditions are available on STOKR.