Smart investment fund
Smart Investment Funds (SIFs) are “smart contract” instantiations of the
traditional investment fund; SIFs use the Findora developer tools to overcome
the lack of transparency in investment funds today. Participants in a SIF
include fund managers, investors, escrow agents, and target entities. Fund
managers are responsible for configuring the initial structure of the fund and
raising capital from investors. To achieve transparency, all capital is sent to
the SIF over Findora, whether digital fiat’ tokens backed by an issuing bank or a cryptocurrency.
The assets are held in secure smart contracts until transparently delivered to the target
entity or fund, whether a privately held company, a venture fund, or asset
owner seeking capital.
- Figure 1: A representation of asset flow in a money market fund operated through a SIF.
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In a typical private equity fund, investors first make capital commitments,assume the liability for uncalled capital, and deliver capital just in time whenthe GP makes a call for an investment. This is captured by making eachcapital commitment into a security token held by the fund manager. In acapital call, the capital commitment security tokens are exchanged for digitalfiat tokens sent to the fund account, which the contract ensures are deliveredto the target investee/debtor entities.
Figure 2: The interaction between investors, financial passports, investees/debtors,bank anchors, and validator agents centered around the SIF account.A SIF adds transparency into investment funds while usingcryptography to preserve confidentiality, and enforces rulesthat can both prevent and expose fraud.
