Ondo Finance is Tokenizing BlackRock and PIMCO Managed ETFs
Ondo Finance is dedicated to creating institutional-grade tokenized assets and to that end they’ve put three of their funds on-chain. These funds represent deposits into funds managed by well-respected firms such as BlackRock and PIMCO along with US Treasuries.
In the DeFi space, investors hold more than $100B in non-yield-bearing stablecoins which can now be invested into these security tokens along with a traditional fiat option. Here are the 3 share classes they’re starting off with according to their announcement:
- US Government Bond Fund (OUSG): OUSG will invest exclusively in short term US treasuries, initially via the Blackrock US Treasuries ETF (SHV)
- Short-Term Investment Grade Bond Fund (OSTB): OSTB will invest in short-term investment grade, corporate bonds, initially via the PIMCO Enhanced Short Maturity Active ETF (MINT)
- High Yield Corporate Bond Fund (OHYG): OHYG will invest in high yield, corporate bonds, initially via the Blackrock iBoxx $ High Yield Corporate Bond ETF (HYG)
Ondo Capital Management will be the investment adviser facilitating the purchase and sale of these ETFs. Ondo Finance Inc. will charge a 0.15% per annum management fee.
The above funds will have yield estimates of 4.62%, 5.45%, and 8.02% respectively. At this time only qualified purchasers will be allowed to invest (individuals or entities with at leaset $5M in investable assets) which will go through KYC/AML prior ot investment.
So why low-risk yield on-chain? Why not stick to DeFi’s higher yields?
Back in 2020–2021, DeFi offered yields never seen before, making tokenized traditional financial products less attractive. Since then, however, DeFi has experienced a downward spiral while interest rates have risen.
Enter Ondo Finance. Because some of that capital may be enticed to move back toward traditional finance’s Treasuries and savings products to earn some low-risk yield, CEO Nathan Allman is providing a vehicle to keep that money in the DeFi space despite its current state. These tokenized funds will both retain existing capital and attract new capital as security tokens become the more relevant use-case for web3.
“Some investors, like hedge funds and market makers, want to be able to move between stablecoins and US Treasuries more quickly than they could traditionally…They are drawn to the daily liquidity of the vehicle and direct support for stablecoins.” — Nathan Allman, CEO and Founder, Ondo Finance
Ondo Finance is shifting its focus toward tokens backed by real-world assets rather than blockchain-native ones and is displaying that today with these 3 tokenized funds.
To further incentivize participation, Ondo is working with respected service providers which ensure the compliance needed with these kinds of investments. This is extremely important as we’ve seen 2022’s unregulated firms being challenged by the SEC, and rightfully so. Here are the others involved:
Custody: Coinbase Custody and Coinbase Prime
Prime Broker: Clear Street
Fund Administrator: NAV Consulting
Tax Advisor and Auditor: Richey May
Subscriptions and redemptions are both offered every business day and will be executed at the share class’s daily NAV calculated by the fund admin. If you are interested in subscribing to any of the above offerings, please reach out to us via ondo.finance or email us at investors@ondo.finance.
About the Author: Jason Barraza is Head of Growth and Operations at Security Token Market and an advisor at Security Token Advisors.
Jason comes from a consulting and entrepreneurial background. During his tenure at The Launch Pad (University of Miami’s entrepreneurship center) he consulted over 100 businesses; evaluating business plans and identifying potential avenues for change and improvement. Jason also has experience in e-commerce and web design through his past businesses and freelance work.
While preparing to become a financial advisor post-college, he quickly realized the benefits of security tokens and their potential, ultimately deciding to join the Security Token Market and Security Token Advisors teams.
Jason believes in blockchain technology, democratization of capital markets, and strives to make meaningful connections along the way.
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