Apollo Launches $100M Tokenized Credit Fund, Ties to Blockchain

Apollo Global Management, a prominent asset management firm based in New York, has made a significant move by opening a new pathway between traditional finance and the blockchain world. This initiative involves the creation of a tokenized credit fund, the Securitize Tokenized Apollo Diversified Credit Fund, known by its ticker ACRED. This fund was developed in collaboration with Securitize Inc., a technology company, and has already attracted over $100 million from investors since its launch in January.

ACRED is designed as a tokenized feeder fund that mirrors Apollo’s established Diversified Credit Fund, which provides loans to mid-sized American companies. Instead of traditional paper statements, investors receive their stake as a digital token recorded on blockchain rails and stored in a personal crypto wallet. This innovative approach not only modernizes the investment process but also leverages the transparency and security of blockchain technology.

One of the key features of ACRED is its ability to allow investors to "mint" a second token called sACRED, which can be used as collateral. This collateral can then be utilized to borrow stablecoins, crypto tokens designed to track the U.S. dollar, on decentralized finance (DeFi) platforms. The borrowed cash can subsequently be reinvested into more ACRED, creating a loop that amplifies exposure to Apollo’s loan book. This mechanism provides investors with the potential for higher returns, although it also introduces additional risks.

The fund requires a minimum commitment of $50,000 and carries a 2% management charge. Early participants in this innovative investment vehicle include Coinbase Asset Management. This move by Apollo follows similar blockchain experiments by other large asset managers, such as BlackRock and Franklin Templeton, indicating a broader shift in Wall Street’s attitude towards crypto, from skepticism to embracing its infrastructure to access new pools of capital.

Securitize emphasizes that ACRED’s value is directly tied to the loans it backs, meaning investors earn the loan interest. Additional gains are possible when sACRED is used as collateral on DeFi platforms, although this comes with increased risk. The era of high-yielding crypto opportunities, such as "100 percent APY on token farming," is over, according to Cindy Leow, co-founder of the Solana-based project Drift. Leow notes that traders are now seeking to hedge against crypto-only yields, making private credit an attractive solution.

Composability, the ability to use one token across multiple programs, is a significant attraction of DeFi. Tarun Chitra, CEO of risk-analytics firm Gauntlet, highlights that this flexibility can attract buyers even in less-than-ideal interest-rate conditions for private credit. However, tying the fund to blockchain infrastructure introduces new risks, such as rising stablecoin borrowing costs, software bugs, or liquidity gaps, which can still result in losses. Gauntlet provides real-time monitoring to track these dangers.

Another risk stems from Apollo’s loan book: if the fund’s net asset value (NAV) falls, ACRED will also decrease in value, and large loans backed by sACRED could be liquidated automatically. Exits from the fund may also be challenging, as redemptions are allowed only once each quarter, and Apollo commits to repurchasing at least 5% of shares. If many investors attempt to exit simultaneously, some requests may only be partially filled. However, because ACRED is on a blockchain, holders can sell their tokens to other buyers at any time, bypassing the normal redemption process, a feature not available in traditional private funds.

The evolution of DeFi from speculative token pools and yield farming incentives to products tied to mainstream assets like corporate loans signifies a deeper integration of old and new finance. Reid Simon, head of DeFi and credit solutions at Securitize, notes that the space has matured, attracting a diverse range of investors, from crossover macro funds to family offices and early traditional finance participants. Looking ahead, industry builders predict that more funds will migrate to blockchain rails, recognizing DeFi as a powerful infrastructure for managing investments.