Back to the list

Credbull's First Crypto Fund Chases High Fixed Yields

source-logo  coindesk.com 04 April 2024 13:56, UTC

Credbull's first private credit fund is targeting returns as high as 20%, much of which is fixed yield.

The product is indicative of a broader maturation in DeFi's lending sector, which has so far been limited to decentralized exchanges and stablecoin applications.

Crypto startup Credbull is soon rolling out an on-chain private credit fund that aims to offer investors exposure to the high-yield lending markets exploding in popularity in traditional finance.

The firm’s first product recreates private credit's core albeit on crypto rails. Investors buy in using the stablecoin USD Coin (USDC), Credbull converts that USDC to dollars via Circle and then passes that money on to the SME originators, the debt financing companies that make loans to the companies.

“We all love to chase high yields and love the market fluctuations to a certain degree," Credbull's CEO Jason Dehni told CoinDesk in an interview. But "there's a lack of high fixed yield solutions today."

The funds' high yield targets are partly a function of its on-chain structure, he explained. Doing everything on a blockchain cuts as much as 150 basis points in fees that would otherwise go to administrative costs.

In private credit, small- and mid-sized businesses in need of financing get their money from specialized lenders instead of banks. These deals have grown into a $1.7 trillion market, according to Bloomberg, that rivals the banks and caters to tony investor types who are willing to lock their money for years in exchange for strong returns.

Such deals aren't unheard of in crypto but they take a definite backseat to the much riskier gambler's menu of sky high farming plays. Most of the stable upside in real world assets (RWA) are tied to tokenized treasuries, or digital representations of U.S. government bonds that can be traded as tokens on the blockchain. Lending pools, which cater mostly to traders, offer variable rate products unacceptable to more serious investors.

There's more than a little crypto twist to Credbull

For starters, its "community" (the investors) will have a say in governing the fund's risk profile and transparency into how it handles their money. Established private credit markets are missing both, Dehni said.

The fund itself also has a six- to 12-month lockup – a far shorter timetable than investors in traditional private credit are used to, he said. It will pay fixed yields as high as 10% for longer-term investors, plus 10% of the upside generated by the fund. Its aim is 18-20% returns.

"We're not targeting family offices," Dehni, a banking journeyman said. "We don't want to lock folks more than 12 months simply because the nature of DeFi investors is very different."

Despite those differences, Credbull's entrance is indicative of a broader professionalization of crypto's credit markets. The company behind lending protocol Goldfinch recently launched an SEC-registered investment advisory that routes private credit deals through its on-chain portal.

Credbull's fund is registered in the Bahamas. It's the first licensed on-chain private credit fund, Dehni claims, and could start chugging in May. He's in active discussions with crypto finance platforms that are considering plugging into Credbull.

"If we are looking to mature as an industry and broaden the reach we have to start thinking about a more diversified high fixed yield," Dehni said.