Altive, a Hong Kong-based fintech, has grown rapidly on the back of providing professional investors with access to private markets. Now it is preparing to launch a fund that will provide exposure to the stock of Elon Musk’s SpaceX.
This comes on the heels of Altive structuring a similar fund to give its clients exposure to Bytedance, the giant company behind TikTok, and in FTX, the Hong Kong-based (Bahamian domiciled) crypto business.
“Private funds was the story for 2020, but in 2021 the story was unicorn funds,” says Hardy Liu, managing partner. He says the popularity of unicorn funds has pushed Altive’s assets under management to about $500 million since it launched these 12 months ago.
Unicorns and above
Unicorns are private companies valued at $1 billion or more, but a handful can be worth over a hundred billion. This year has seen those valuations fall, shadowing steep declines in publicly listed companies. But these remain very big, popular companies. Bytedance’s valuation is now about $180 billion, according to CrunchBase.
FTX was valued at $32 billion at its last capital raise, in January. Since then, crypto markets have suffered massive declines but there’s no public information about a new valuation.
SpaceX, on the other hand, has seen its valuation increase this year. A fundraising in May valued it at $132 billion, a 25 percent increase from the start of 2022.
Creating exposures
Altive creates its products by acquiring shares in these private companies off secondary markets where owners trade these. Altive also partners with venture capital firms to co-invest.
The company is part of an emerging wave of wealthtech companies creating access to private investments – private-equity funds, private credit funds, and private companies.
Liu saw the biggest player in this space, New York-based iCapital, succeed by breaking down allocations to private funds into smaller bites for family offices or rich individuals who were still too small to gain exposure through their private banks. A European competitor, Moonfare, opened shop in Asia in 2019, while fintechs such as ADDX and CapBridge in Singapore have followed suit.
Liu was previously an analyst at Macquarie where he saw the appeal of infrastructure and other private funds to institutional investors – and the readiness of private-equity GPs (general partners) to add family offices to their roster of clients.
A stumbling block for most family offices or individuals is an unwillingness to lock up capital for ten years in a PE fund. Liu saw iCapital create semi-liquid structures around private debt products.
Allied with Apoidea’s A.I.
He competes against these established players based on technology. Altive is part of Apoidea, an artificial-intelligence company that uses natural-language processing to enable machines to read and interpret financial texts.
Liu is co-founder of Apoidea, whose customers include banks using it to automate tasks such as KYC and credit processing. He launched Altive in 2019 with backing from Pacific Century Group and the Alibaba Entrepreneurs Fund.
Leveraging this AI, Altive can structure and close a new fund quickly, so it can capture market opportunities such as excitement around SpaceX’s latest funding round in May, a monster that raised $1.5 billion.
Liu says the business was a calling: “It’s not fair that only the richest people have access to the best investment opportunities.” Of course, he can only market to professional investors (in Hong Kong that means people with about $1 million of investible assets).
Falling thresholds
He says it is possible that, over time, regulators will allow companies like Altive to lower their thresholds, as is the case in the U.S. The challenge is that the supply for shares in companies like SpaceX comes from the U.S., as it’s employees of these tech companies who trade their shares in private markets, in order to unlock cash.
Although China has a big tech scene it doesn’t have a transparent secondary market, and outside of China there is no big coterie of wealthy tech employees.
As a result, there is a robust market for secondary shares in the U.S. that has long attracted hedge funds and long-only mutual fund companies, as well as private banks and brokers. But there’s very little appetite for this in Asia. Therefore Altive has to create products to fit specific, thematic demand, and spend a lot of resource on content marketing.
Raising capital
Liu says the company will look to do another capital raise itself by the end of this year, for an undisclosed amount. The proceeds will finance expansion into Japan and Australia, as well as Southeast Asian markets beyond Singapore, where Altive already has a presence.
“We don’t need a huge amount because we are already profitable,” Liu said. “The goal is to find strategic partners to help us with local expansion.”
Liu is also exploring the idea of using a blockchain-based DAO, or decentralized autonomous organization – a governance mechanism meant to enable a platform or exchange to create fully digital products that can be structured, issued, and traded on crypto exchanges within minutes.
Whether there’s a need, however, remains to be seen: private shares do not trade in high frequency. Liu says blockchain rails can provide efficiency in tokenizing company shares. This would represent a transformation of how private shares might trade, but it would require the companies themselves – the Bytedances and SpaceXs – to actively issue tokenized securities.
That would be a step change from Altive’s current model, which operates without those companies being involved.
“We’re stuck between true tokenization and no tokenization,” Liu said. “But things change, especially in crypto.”
