Digital securities firm Securitize acquiring the $40 billion crypto asset manager Onramp Invest

Digital securities firm Securitize is expanding its offerings of alternative investment assets to major cryptocurrency industry players by acquiring the $40 billion crypto asset manager Onramp Invest. The purchase provides Securitize access to Onramp's large base of registered investment advisor (RIA) customers, including major crypto fund issuers and platforms.

Securitize aims to simplify the process for RIAs to include private equity, private credit, real estate, and other alternative assets in client portfolios.  Onramp's current RIA network encompasses over $40 billion in managed assets, with its technology platform providing easy access to crypto and digital securities.

Some notable Onramp customers are the exchange-traded fund (ETF) issuer WisdomTree, asset manager Valkyrie Invest, Global X ETFs, crypto media firm CoinDesk, and various wealth management and family office RIAs. By acquiring Onramp, Securitize instantly inherits these relationships.

Now RIAs on the Onramp platform can seamlessly offer their clients carefully vetted alternative investment opportunities from Securitize's portfolio including private equity funds, startups, real estate, and more. All will soon be available for purchase and management directly through Onramp's dashboard.

Securitize CEO Carlos Domingo stated the acquisition significantly diversifies the alternative assets RIAs can provide to clients beyond just crypto funds. He said:

"Onramp already offered RIAs easy access to digital assets, so it is a very natural extension to offer them tokenized alternative assets to complement their portfolios. Most wealth is generated in private market alternative assets and bringing Securitize and Onramp together enables registered investment advisors to give their clients access to that wealth generation."

The purchase comes after Securitize and Onramp originally partnered in March 2023 to increase RIA access to tokenized private equity offerings. At the time, Onramp had signed up RIAs representing over $35 billion in assets under management.

Securitize has pioneered the use of blockchain technology to tokenize traditional alternative asset classes so they can be more easily traded and managed. The firm fractionalizes assets into digital tokens registered as securities, providing opportunities for smaller investments.

Recent Securitize initiatives include working with the Spanish real estate investment trust Mancipi Partners to tokenize its equity. The tokens will launch secondary trading on Avalanche in September. Securitize also partnered with the proptech firm SmartRent to tokenize its shares, enabling trading on Ethereum.

Onramp provides both the technology and licensed support RIAs need to securely purchase digital assets within compliance requirements. Its all-in-one platform removes the friction and risks of directly handling crypto and blockchain-based securities.

The integration with Securitize now significantly expands the investable assets available to RIAs through a single solution. Instead of piecing together various platforms and relationships, they can remain inside Onramp's system to buy into deals previously restricted to institutional investors and venture capital firms.

Welcoming accredited but non-institutional investors to private markets aligns with the growing decentralized finance ethos. Tokenization unlocks liquidity premiums and democratizes access using blockchain's inherent advantages.

However, most individual investors lack the connections to access exclusive private deals. Onramp's chief strategy officer Tyrone Ross explained how teaming up with Securitize overcomes this hurdle through technology. He said:

"Institutions have focused on alternatives and private markets because that’s where a lot of the alpha is. Now, through tokenization, individual investors can participate. We’re making these opportunities available to registered investment advisors in a way that’s simple, safe and compliant. So they can provide their high-net-worth clients with enhanced portfolio returns.”

Cryptocurrency represents the most popular alternative asset class that RIAs currently allocate toward, with many clients demanding exposure. But the volatility and risks of crypto necessitate balancing with other uncorrelated assets.

Private markets like venture capital, leveraged buyouts, and distressed real estate provide returns unlinked to public stocks. This helps manage portfolio risk, particularly in volatile macro environments fueled by high inflation and rising interest rates.

Onramp Co-Founder and Co-CEO Tyrone Ross will stay on board following Securitize's acquisition and oversee integration. The combined team plans to leverage their complementary strengths and experience to accelerate innovation.

For Securitize, adding Ross's compliance knowledge helps navigate the highly regulated environment of securities tokens. Ross previously served as head of U.S. distribution at iCapital Network, another alternative assets fintech platform. Before that, he led business development at Heritage Capital and United Capital.

Securitize Co-Founder and CEO Carlos Domingo brings deep familiarity with unlocking liquidity in private markets through tokenization. He previously founded the securities token firm SPiCE VC and co-founded crowdfunding platform EquityNet. His technology background as a former software engineer at IBM lends valuable technical experience.

Together, the pair aims to modernize how RIAs source and manage alternative investments by fully embracing blockchain's potential. Allocating to private deals through tokenization aligns with the decentralizing spirit of DeFi and Web3.

However, regulatory compliance remains crucial when opening alternative assets to wider audiences. Onramp's Chief Compliance Officer Edric Ellis commented that maintaining diligence and security while expanding opportunity is key. He said:

“At the end of the day, we are fiduciaries, and our north star is providing financial advisors with access to investments in a compliant way so they can uphold their fiduciary duty to clients. Partnering with Securitize will allow us to vastly expand the opportunity set for wealth managers and unlock value in a way that simply wasn’t possible before.”

For tokenized real estate, private equity, and other assets deemed securities, Securitize registers them as digital securities with the SEC. Rigorous know your customer (KYC) and anti-money laundering (AML) checks vet all investors and transactions on the platform.

This ensures RIAs meet fiduciary obligations when allocating to deals on behalf of clients. Onramp also provides accredited investor verification, custody, reporting, and other support to maintain compliance.

Securitize and Onramp represent the vanguard of DeFi innovation mature enough for professional fund managers to embrace. As more RIAs adopt the expanding alternative investment universe available through blockchain technology, expect the space to continue advancing at a rapid pace.

How does opening up private market opportunities align with the ethos of decentralized finance?

Bringing private equity, venture capital, real estate, and other exclusive alternative assets to individual investors through tokenization very much aligns with the ethos of decentralized finance (DeFi). Lowering barriers to entry that previously blocked non-institutional investors from lucrative opportunities decentralizes and democratizes finance.

Tokenization fractionalizes asset ownership, provides instant liquidity instead of multi-year lockups, and enables 24/7 global trading through blockchain technology. This opens up alpha generation in private markets to RIAs catering to clients who do not meet institutional minimums or have the right connections.

Aligning alternative investments with the accessibility and transparency of cryptocurrency and blockchain networks helps further the DeFi mission of disrupting traditional finance.

Can tokenized alternative assets meaningfully diversify crypto-heavy portfolios?

The volatility and correlation of cryptocurrencies means most crypto-heavy portfolios can benefit greatly from diversification into alternative assets with low or negative correlation. Private equity, venture capital, real estate, and other private deals provide exposure unlinked to the public stocks that crypto closely tracks.

Tokenized alternative assets can deliver uncorrelated returns and income streams to balance out a portfolio overweight in high beta assets like Bitcoin and Ethereum. The blockchain technology integration also helps merge the best aspects of DeFi and private markets for modern investors.

Adding exposure to digital private equity funds, startups, infrastructure, real estate tokens, and more provides diversification tailored to the Web3 era. For crypto native investors, tokenized alternatives can prove superior diversifiers compared to traditional low-correlation assets.