# Apollo Global Management Adopts Blockchain Through Tokenized Credit Fund

Apollo Global Management, a prominent New York-based investment firm managing a staggering $785 billion in assets, is pioneering the integration of traditional finance with blockchain technology. As reported by Cryptopolitan on October 21, Apollo has taken a significant step forward by collaborating with Securitize Inc. to introduce the Securitize Tokenized Apollo Diversified Credit Fund (ACRED). This innovative offering bridges the gap between conventional asset management and cutting-edge blockchain solutions.

Since its launch in January 2023, ACRED has garnered substantial interest, attracting more than $100 million in investments, according to a Bloomberg report.

# Transforming Traditional Lending Through Tokenization

ACRED is a trailblazing tokenized feeder fund based on Apollo’s established diversified credit fund. The core fund supports lending to mid-sized businesses in the United States. However, what sets ACRED apart is its use of blockchain technology. Instead of receiving traditional paper-based ownership statements, investors obtain digital tokens that represent their shares, recorded securely on blockchain and accessible through personal cryptocurrency wallets.

# Enhancing Yield Opportunities with sACRED Tokens

Additionally, investors in ACRED can issue a secondary token called sACRED. This innovative token can be used as collateral to borrow stablecoins pegged to the US dollar on decentralized finance (DeFi) platforms. The borrowed stablecoins can then be reinvested into ACRED, enabling investors to scale their exposure to Apollo’s loan portfolio.

To participate in this unique fund, investors are required to put forward a minimum investment of $50,000. Apollo charges a 2% management fee for the service. Notably, Coinbase’s asset management arm is one of the early adopters of this initiative, underscoring growing institutional interest in blockchain-based financial products.

Apollo's efforts align with similar blockchain experiments by asset management giants such as BlackRock and Franklin Templeton. This reflects an increasing acceptance of blockchain’s potential to diversify traditional financial models.

According to data provided by Securitize, the fund’s performance is directly linked to the value of the underlying loans, allowing participants to earn interest on their investments. The collateralization of sACRED tokens on DeFi platforms offers additional opportunities for yield, albeit with higher associated risks.

# The Risks of DeFi Integration

While leveraging blockchain technology provides substantial benefits, it also comes with notable risks, particularly within the DeFi ecosystem. ACRED’s token value is tied to the fund’s net asset value (NAV), which is recalculated daily to manage price volatility. However, challenges such as fluctuating stablecoin borrowing costs, potential software vulnerabilities, and liquidity constraints persist.

To mitigate these risks, Securitize employs real-time monitoring protocols. Nonetheless, Apollo’s loan portfolio itself presents its own set of challenges. A decline in the fund’s NAV could lead to a decrease in the value of ACRED tokens, potentially triggering the liquidation of loans collateralized by sACRED tokens.

Redemptions for the fund are only available on a quarterly basis, and Apollo has committed to repurchasing at least 5% of the fund’s shares during these windows. However, if redemption requests exceed the fund's liquidity, only a proportion of those requests may be fulfilled.

Unlike traditional private equity funds, ACRED’s blockchain infrastructure offers an advanced level of flexibility. Investors can sell their digital tokens to other buyers outside of the quarterly redemption cycles, marking a progressive improvement in private fund management.

# A New Era: Where Traditional Finance Meets Blockchain

Just a few years ago, DeFi was primarily associated with speculative tokens and high-risk yield farming. Today, the landscape has matured significantly, with blockchain platforms increasingly supporting traditional financial assets like corporate loans. This development signals a profound convergence of legacy financial systems (TradFi) and blockchain technology, bringing forth a new era of financial innovation.

Reid Simon, Head of DeFi and Credit Solutions at Securitize, emphasized this evolution: “As the DeFi landscape matures, we are witnessing greater interest from macro funds, family offices, and early-stage TradFi investors in on-chain investment opportunities.”

Paul Frambot, co-founder of the DeFi platform Morpho, echoed these sentiments: “DeFi is an extraordinary infrastructure, and it's only a matter of time before more investors manage funds on-chain.”

This growing alignment between traditional financial strategies and decentralized blockchain technology could reshape global capital markets. As innovative financial vehicles like ACRED gain traction, the barriers between TradFi and DeFi continue to blur, forging a path toward a more integrated and technologically advanced financial ecosystem.