Private equity fund tokenization
Private equity fund tokenization through ATK automates LP servicing, NAV tracking, and distribution processing. The platform reduces fund administration costs while enabling secondary liquidity for limited partners.
Who should read this: General partners, fund administrators, and investor relations teams managing institutional LP relationships.
Business value: Cut fund administration costs by 60%, enable real-time performance visibility, calculate distribution entitlements with on-demand claiming, and facilitate compliant secondary transfers.
Business challenge
Apex Capital runs a $200 million venture fund with 80 institutional LPs. Traditional fund administration is expensive, slow, and opaque. Quarterly valuations take weeks to calculate and distribute. Capital calls and distributions require manual processing. Secondary transfers between LPs are nearly impossible due to paperwork complexity.
Traditional approach
How ATK solves it
Fund unit creation
Apex tokenizes their fund structure as equity tokens representing limited partner units. Each token carries ownership rights, profit sharing, and governance participation. The fund's operating agreement is cryptographically linked to the token metadata.
LP onboarding
Institutional investors complete accredited investor verification and qualified purchaser checks through the platform's identity system. Their verified status enables participation across multiple Apex funds without re-verification.
Subscription processing and capital tracking
When LPs commit capital, Apex issues fund tokens representing their percentage ownership. The platform tracks committed versus called capital through on-chain records.
Note: The ATK fund implementation supports proportional (pro-rata) distributions based on token holdings. Complex waterfall logic (preferred returns, catch-up provisions, carried interest tiers) requires custom addon development or off-chain calculation with on-chain distribution execution.
NAV updates and performance tracking
Monthly or quarterly, Apex updates the net asset value through the admin portal. The NAV per token updates automatically for all holders. Performance metrics—IRR, MOIC, quartile rankings—can be calculated from on-chain transaction history via subgraph queries or dapp dashboards.
Scheduled distributions
When portfolio companies exit or pay dividends, Apex calculates entitlements proportionally for all token holders. Token holders claim their proceeds on-demand through the smart contract. What used to require wire instructions to 80 different banks now executes through claim-based distribution with instant settlement (via tokenized cash) or configured payment adapters (for fiat settlement).
Management fee collection
The platform calculates management fees based on committed capital or NAV according to fund terms, deducts the appropriate amount, and handles the transfer to Apex's treasury. Fee schedules are configured in the fund token's parameters.
Secondary trading among LPs
When an LP wants to exit early, the platform facilitates transfer to another qualified institutional investor. Compliance checks ensure the buyer meets requirements. Settlement happens atomically. Transfer restrictions in the fund documents are enforced programmatically, so limited transfer windows or ROFR rights execute automatically via compliance modules.
Key capabilities
| Capability | Traditional | With ATK |
|---|---|---|
| Fund administration | Quarterly fees to third-party admin | On-chain tracking reduces overhead |
| NAV distribution | 2-3 weeks delay | Real-time update to all LPs |
| Distribution processing | Wire to 80 banks, days of work | Calculated entitlements, on-demand claiming |
| Fee collection | Manual invoicing & payment | Programmatic deduction and transfer |
| Secondary transfers | 90 days + legal costs | Hours with embedded compliance |
| LP reporting | Quarterly statements | Real-time dashboard access |
Measurable outcomes
Operational efficiency – Fund administration costs drop by approximately 60% because NAV calculations, distributions, fee collection, and LP reporting are automated or significantly streamlined.
LP satisfaction – Real-time holdings visibility and on-demand distribution claiming improve investor experience. Support inquiries about "where's my distribution?" are eliminated.
Secondary liquidity – What used to take 90 days and significant legal costs now settles in hours with compliance built in. LPs value liquidity options, even if used rarely.
The diagram above shows the ATK fund lifecycle, from tokenization through automated servicing to secondary liquidity.
Compliance considerations
Private equity fund tokens operate under securities regulations requiring:
- Qualified purchaser verification – Enforced via OnchainID claims
- Holding periods and lock-ups – Configured via time-lock compliance modules
- Transfer restrictions – ROFR rights, limited transfer windows, GP approval workflows
- Jurisdiction controls – Investment restrictions by geography
- Audit trails – Full transaction history for regulatory reporting
For detailed compliance architecture, see Compliance & Security.
Implementation checklist
- Define fund structure (equity tokens, percentage ownership model)
- Select compliance template (qualified purchaser, accredited investor, or custom)
- Integrate KYC/AML provider for institutional LP verification
- Configure NAV update workflow and admin portal access
- Set up distribution schedule and payment adapters
- Configure management fee calculation parameters
- Upload fund documents (LPA, operating agreement) and link to token metadata
- Deploy smart contract and conduct initial capital call
- Test distribution workflow and secondary transfer restrictions
Limitations and considerations
- Waterfall complexity – Out-of-the-box implementation supports pro-rata distributions; custom waterfall logic (preferred returns, catch-up, carried interest tiers) requires addon development
- NAV data source – NAV updates are manual entries via admin portal; integration with portfolio valuation systems requires custom API development
- Regulatory approval – GP and LP legal counsel should review tokenized structure for compatibility with existing fund documents and regulatory frameworks
Next steps
- Review SMART Protocol architecture to understand embedded compliance
- Explore Developer Documentation for custom addon development guidance
- Contact your SettleMint representative to discuss a fund tokenization pilot