Exploring How Tokenization is Transforming Private Equity Markets

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An Introduction to Equity Markets

Equity markets are a key element of the financial infrastructure and are critical for the allocation of capital. In essence, equity markets allow businesses to raise money by issuing shares to investors. This capital is then used to finance new businesses, expand current businesses, or simply provide liquidity to shareholders.

Equity markets offer a wide range of opportunities for investors. For example, investors can invest in public companies that are listed on a stock exchange, or in private companies that are not listed on any exchange. But since they are not listed on exchanges, the private companies have limited access to a pool of investors, and subsequently liquidity.

As per a 2021 McKinsey report, private equity has been outperforming public equity consistently for the past twenty years. Over a period of ten years, private equity generated annual returns of 14.3%. Meanwhile, the S&P 500 which is a benchmark for the public market returned 13.8%.

How Does Tokenization Apply to Private Equity Markets?

Tokenization is the process of taking a real-world asset and dividing it into digital tokens. These digital tokens will be in the form of non-fungible tokens or NFTs registered on a public ledger. These tokens can then be sold to investors, who can use them to purchase equity in the underlying asset such as a share in a private company. This can make it easier for smaller investors to participate, thus expanding the investor pool. Previously, only high-net-worth individuals and institutional investors had access to private equity deals. 

But with tokenization, we can have a blockchain-based secondary market for people to trade digital shares. So, anyone with a smartphone can buy a stake in a company.

Tokenization also offers greater liquidity to private equity markets. Previously, investors could only sell their stake in a company if they found a buyer who was interested in the same company. But with tokenization, investors can sell their tokens on an exchange, allowing them to cash out immediately.

Key Benefits of Tokenizing Private Equity Assets

When you tokenize private equity assets, you unlock a number of key benefits that can have a transformative effect on the market. Here are some of the most important ones:

  1. Increased liquidity
  2. Increased transparency
  3. Faster, more efficient transactions
  4. More opportunities for diversification

Exploring the Use Cases for Tokenized Private Equity Markets

When it comes to private equity markets, tokenization can be used to connect investors and companies in a new decentralized way. This can be done through smart contracts, which triggers specific events based on certain conditions being met. For example, if a fund has reached its target amount, then the investor’s tokens can automatically be released.

Tokenization can also make investing more accessible to everyone. By digitalizing private assets and creating tokens on the blockchain, these transactions become simpler and more secure. Investors no longer have to worry about paperwork or physical asset custody. With the help of smart contracts, everything becomes automated.

Moreover, tokenized assets have the potential to bring about more liquidity for investors. With tokenized assets, investors can gain access to a wide range of private investments that are usually only available to big institutional players or high-net-worth individuals. This makes it easier for smaller investors to participate in capital markets and benefit from the potential returns they offer.

Unlocking Cross-Border Investment Opportunities with DeFi and Tokenization

DeFi and tokenization can also unlock cross-border investment opportunities. With DeFi, global investors can access private equity markets without the need for intermediaries or capital restrictions. This can let them tap into new and existing profitable opportunities in real estate, venture capital, and beyond.

Tokenization also provides a way to reduce settlement times, increase liquidity, and better manage risk through fractionalized investments. Tokenized securities make it possible to divide larger assets into smaller pieces that can be traded on secondary markets. This makes investing in high-value assets more accessible to different types of investors by reducing the amount of upfront capital required to participate.

Overall, DeFi offers many advantages to private equity investors. It gives them more flexibility when it comes to accessing global markets and unlocking new investment opportunities. With tokenization, they also have an asset class that is both liquid and transparent while reducing costs associated with capital investments.

Last Note

In conclusion, tokenizing private equity will make the process more efficient and democratize access to these markets. It will also likely lead to the emergence of new private equity funds that are exclusively tokenized.

But tokenizing the private equity market is a huge task. We believe it can be achieved in the near future but as a first phase, private companies need to understand how it works and they need to be present in the digital world. Similar to public markets, if a private company wants to get listed, it should be ready to meet the investors’ expectations.

At iOWN Group, we have established a blockchain based platform to enable private companies to establish an identity on the blockchain. This will enable them to represent their company shares in form of digital tokens for their current shareholders. Then, they will distribute these shares in our digital wallet and provide shareholders with reports like valuation and business performance. The next step will be allowing these companies to make dividend distributions with a few clicks. And once we have a ready infrastructure and digital stakeholders, it will be easier to have a fully tokenized secondary private market.


It offers several features that can help you manage your equity, oversee share distribution, maintain investor relations, and track business performance. The platform empowers business owners to create their unique digital identity by providing them with the technology and architecture for it. It also helps to build credibility and trust, while saving time for everyone involved.

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