iSTOX - Bringing Equal Access to Investing

iSTOX - Bringing Equal Access to Investing

This week I spoke to Oi Yee Choo, Chief Commercial Officer of iSTOX. iSTOX is on a mission to democratise the private capital markets by bringing previously out-of-reach products to individual accredited investors.

Thanks so much for joining me! First up, the pitch! What is iSTOX and why does it exist?

The public markets have a relatively efficient infrastructure for dealing with a large number of investors, but the private markets are a different story. Most processes are manual and can only accommodate a small number of investors. That is why they set high minimum investment sums, usually around USD 1 million, leaving out most individual investors. If you have USD 2 million in assets and therefore qualify as an accredited investor, you would not put half of your portfolio into a single hedge fund product.

Enter iSTOX. As a digital securities platform, we use blockchain and smart contract technology to automate processes throughout the life cycle of a security. The efficiencies from tokenisation are scalable and allow us to serve many investors. We can therefore bring the minimum investment size down from USD 1 million to USD 20,000. Steps we have automated include dividend or coupon payments, the real-time tracking of ownership of the securities, and the matching and settling of secondary trades, which happens instantly on the iSTOX exchange, instead of the two or more working days most other exchanges need.

Why should individuals consider private market investments? Because the private markets have a relatively low correlation with the public markets. Using them, you can build a more diversified portfolio with higher long-term returns. Private market products are generally more risky, and they also come with higher rewards. The fractionalised ownership allowed by iSTOX enables individuals to manage risk by deciding how much of an investment is appropriate for their portfolio.

iSTOX is fully regulated by the Monetary Authority of Singapore. Investors using the iSTOX platform today come from 24 countries, spanning Asia, Europe, the Americas (excluding the US), Australia and New Zealand.

“The digital securities we issue are also truly digital – that is, they are issued directly onto the blockchain.”

Compared to others operating within Alternative Finance - how is iSTOX doing things differently? What do you offer above others in the market?

Besides being able to fractionalise investments, we are a multi-asset platform that issues private market funds, debt instruments (including bonds and commercial papers) and equity. We are also looking to launch structured products.

The digital securities we issue are also truly digital – that is, they are issued directly onto the blockchain. Transactions and coupon payments are happening within the blockchain, in real-time. This is in contrast to platforms that issue and administer securities in the traditional way, and use the blockchain as an after-the-fact ledger, recording transactions on it but not in real-time. For an investor, this distinction will manifest itself when you look at settlement times, as only truly digital securities can be settled instantly.

I’m really interested by the range and type of assets you allow investment in - how did you select this asset range? 

iSTOX is building a single platform that investors can go to for all their private market needs. That is why we have worked hard to include a wide range of asset types – in order to construct a comprehensive marketplace, on which investors can see a rich array of products and find investments most appropriate to their portfolio at the current point in their investment journey.

Each listing has furthermore gone through a rigorous due diligence process, taking into consideration factors such as the issuer’s track record, where they are regulated, who the other investors are and whether they can meet disclosure requirements. In addition, each listing is approved by an independent listing committee that comprises veterans of the financial industry.

“Each listing is approved by an independent listing committee that comprises veterans of the financial industry”

It’s amazing to hear of your recent $50m funding round - congrats! What does your roadmap look like following this round?

We are grateful for the support from investors in our Series A round. Our current list of backers includes Singapore Exchange, Temasek subsidiary Heliconia, Japan government-backed investors JIC Venture Growth Investments and the Development Bank of Japan, as well as Tokai Tokyo Financial Holdings and Juroku Bank from Japan, Hanwha Asset Management from Korea and Kiatnakin Phatra Financial Group from Thailand.

We are building iSTOX into a mature platform with a strong list of issuers and investors. For an investor, that means a range of products that can meet their specific portfolio diversification needs. For an issuer, the high volume of capital from platform investors will ensure it can meet its fundraising target for each new issuance.

With the strong support of shareholders, iSTOX is confident we can achieve our mission.

And what is the next 3 months bringing? Anything we should look out for?

In the next 3 months, expect more exciting investment opportunities. By the end of 2021, our plan is to have completed at least 20 issuances, up from 11 currently. We are announcing a new product line soon – commercial papers, which can serve as a cash management solution. Later this year, we plan to make available to our investors pre-IPO unicorn equity.

What do you see as the biggest trends in Alternative Finance internationally?

One major trend is how digital securities are blurring the line between the private and public markets. If private market products become more accessible to individual investors in fractional units, there will no longer be such a sharp distinction between what is private and what is public.

As that happens, we will see a fairer playing field for all investors. For issuers, it means access to a bigger pool of capital in the pre-IPO phase, which could potentially help them stay private for much longer. They will find more space and a longer runway to grow and to make longer-term decisions, instead of being under pressure to show profits every quarter.

Amazing! Thanks so much for your time. Check out iSTOX at www.istox.com