Tokenised private equity and private credit.

For private equity this usually means a share in a fund-of-funds or feeder structure investing into existing private equity funds. For private credit it more often means a participation in a credit fund lending to companies without access to listed bond markets. In both cases the token records an economic interest, not direct control over the underlying companies or loans.

Valuation of these funds typically happens quarterly, set by the fund manager, not continuously like a listed stock. The token changes nothing about that: the price shown on a tokenisation platform is usually simply the last published net asset value, possibly adjusted by a trading premium or discount where a secondary market exists.

The main selling point of tokenised private equity and credit is easier transfer between investors via a platform matching buyers and sellers. That is different from real liquidity: there still needs to be a counterparty willing to buy at a price the seller accepts. In weaker market conditions that counterparty may be absent, just as with non-tokenised secondary markets for these funds.

Some providers build in a periodic redemption facility, where the fund itself buys back a limited percentage of tokens each quarter at the last set value. That offers more certainty than a pure secondary market, but the size of that facility is almost always limited and can be suspended temporarily during stress periods.

Private equity and credit funds have traditionally had high entry amounts, often hundreds of thousands of euros. Tokenisation is often used to lower that threshold by splitting a fund share into smaller tokens, making entry from a few thousand or even a few hundred euros possible on some platforms.

That does not remove the fact that underlying regulation often still assumes qualified or professional investors, with a suitability test or minimum wealth as a condition. A lower minimum amount does not automatically mean the product is open to everyone; check the investor classification the platform applies.

Besides the usual market and credit risk of the underlying companies and loans, private equity and credit carry a valuation risk: since there is no daily market price, the reported value depends on models and assumptions made by the fund manager. A downward revision can cause the token's value to drop sharply in one step, even if the price had appeared stable before.

There is also counterparty risk on the platform issuing the tokens and managing the link with the underlying fund. If that platform runs into trouble, settlement of your interest can be delayed, even if the underlying fund itself is healthy.

Investors who value liquidity more than access to private markets often find comparable exposure through listed private equity vehicles or credit funds tradeable daily. These offer more liquidity, but usually a different risk-return profile and sometimes a price trading structurally below net asset value. Tokenisation positions itself between that listed alternative and the classic, fully illiquid private fund.