# Private equity

Source: https://docs.settlemint.com/docs/executive-overview/use-cases/private-equity
Private equity fund tokenization through DALP supports LP servicing, NAV tracking, distribution processing, and compliant secondary-transfer workflows for fund units.



**Who should read this:** General partners, fund administrators, and investor
relations teams managing institutional LP relationships.

**Business value:** Model fund units, track holdings and NAV, calculate
distribution entitlements with on-demand claiming, and route secondary transfers
through embedded compliance checks.

## Business challenge [#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 [#traditional-approach]

<Mermaid
  chart="`
flowchart TB
  FUND(Fund Launch)
  ADMIN(Fund Administrator<br/>High Quarterly Fees)
  NAV(NAV Calculation<br/>2-3 Weeks Delay)
  DIST(Distribution Processing<br/>Wire to 80 Banks)
  FEES(Fee Collection<br/>Manual Invoicing)
  SECONDARY(Secondary Transfers<br/>90 Days + Legal Costs)
  REPORT(LP Reporting<br/>Quarterly Statements)
  ISSUES(Common Issues)
  
  ERROR(Calculation Errors)
  DELAY(Payment Delays)
  ILLIQUID(No Liquidity)
  
  FUND --> ADMIN
  ADMIN --> NAV
  ADMIN --> DIST
  ADMIN --> FEES
  ADMIN --> SECONDARY
  ADMIN --> REPORT
  NAV --> ISSUES
  DIST --> ISSUES
  SECONDARY --> ISSUES
  ISSUES --> ERROR
  ISSUES --> DELAY
  ISSUES --> ILLIQUID
  
  style FUND fill:#8571d9,stroke:#654bad,stroke-width:2px,color:#fff
  style ADMIN fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style NAV fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style DIST fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style FEES fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style SECONDARY fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style REPORT fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style ISSUES fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style ERROR fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style DELAY fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
  style ILLIQUID fill:#b661d9,stroke:#8a3fb3,stroke-width:2px,color:#fff
`"
/>

![Fund tokens carry fund-specific metadata including investment category, fund class, and management fee parameters.](/docs/screenshots/funds/fund-detail-1.webp)

## How DALP solves it [#how-dalp-solves-it]

### Fund unit creation [#fund-unit-creation]

Apex tokenizes their fund structure as equity tokens representing limited
partner units. Each token can carry fund-specific metadata such as investment category, fund
class, and management fee parameters. Fund documents can be uploaded and linked
from the token metadata so investors and operators have a consistent reference.

### LP onboarding [#lp-onboarding]

Institutional investors complete accredited investor verification and qualified
purchaser checks through the platform's identity system. Reusing verification
across funds depends on the identity provider, claim configuration, and fund
rules.

### Subscription processing and capital tracking [#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 DALP 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 [#nav-updates-and-performance-tracking]

Monthly or quarterly, Apex updates the net asset value through the admin portal.
Holders can see the latest recorded fund-unit valuation in the platform.
Performance metrics such as IRR, MOIC, or quartile ranking belong in the fund
administrator's reporting model unless they are configured in a connected
reporting workflow.

### Scheduled distributions [#scheduled-distributions]

When portfolio companies exit or pay dividends, Apex calculates proportional
entitlements for token holders. Token holders can claim tokenized distributions
on-demand through the smart contract. Fiat payments and bank-wire processes
remain dependent on the configured payment adapters and the fund's operating
process.

### Management fee collection [#management-fee-collection]

The AUM fee feature can calculate time-based management fees from total supply
and mint the fee amount to the configured recipient. Fund administrators still
need to align the configured fee rate, collection cadence, and accounting process
with the fund terms.

![Equity details with on-chain governance parameters.](/docs/screenshots/equity/equity-detail-1.webp)

### Secondary trading among LPs [#secondary-trading-among-lps]

When an LP wants to exit early, the platform supports a transfer to another
qualified institutional investor. Compliance checks ensure the buyer meets the
configured requirements before the transfer can proceed. Transfer restrictions in
the fund documents can be represented through compliance modules, approval
workflows, or operational review, depending on the fund terms.

## Key capabilities [#key-capabilities]

| Capability                  | Traditional                         | With DALP                                   |
| --------------------------- | ----------------------------------- | ------------------------------------------- |
| **Fund administration**     | Quarterly fees to third-party admin | On-chain records reduce reconciliation work |
| **NAV distribution**        | Delayed LP statements               | Current recorded valuation visible in DALP  |
| **Distribution processing** | Wire instructions and manual checks | Calculated entitlements, on-demand claiming |
| **Fee collection**          | Manual invoicing and payment        | AUM fee collection to configured recipient  |
| **Secondary transfers**     | Legal and operational coordination  | Compliance-gated transfer workflow          |
| **LP reporting**            | Periodic statements                 | Dashboard access to current holdings        |

## Expected outcomes [#expected-outcomes]

**Operational efficiency** – On-chain records, configured fee parameters, and
claim-based distribution workflows reduce reconciliation and manual servicing
work. The exact cost impact depends on the fund's operating model and connected
payment systems.

**LP experience** – Current holdings visibility and on-demand distribution
claiming can reduce status inquiries when the fund uses the platform as its
servicing interface.

**Secondary liquidity** – DALP can route eligible LP transfers through configured
identity and compliance checks. Legal approvals, ROFR handling, and settlement
arrangements still need to match the fund documents.

<Mermaid
  chart="`
flowchart TB
  FUND(Fund Launch)
  TOKEN(Tokenized Fund Units<br/>Smart Contract)
  NAV(NAV Updates<br/>Admin Portal Entry)
  DIST(Scheduled Distributions<br/>Claim-based Settlement)
  FEES(AUM Fee Collection<br/>Configured Recipient)
  SECONDARY(Secondary Trading<br/>Compliant Transfer)
  REALTIME(Current Holdings<br/>LP Dashboard)
  BENEFITS(Key Benefits)
  
  EFFICIENT(Reduced Reconciliation Work)
  CLAIMS(On-demand Claims)
  LIQUID(Compliance-gated Transfers)
  
  FUND --> TOKEN
  TOKEN --> NAV
  TOKEN --> DIST
  TOKEN --> FEES
  TOKEN --> SECONDARY
  TOKEN --> REALTIME
  NAV --> BENEFITS
  DIST --> BENEFITS
  SECONDARY --> BENEFITS
  BENEFITS --> EFFICIENT
  BENEFITS --> CLAIMS
  BENEFITS --> LIQUID
  
  style FUND fill:#8571d9,stroke:#654bad,stroke-width:2px,color:#fff
  style TOKEN fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style NAV fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style DIST fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style FEES fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style SECONDARY fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style REALTIME fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style BENEFITS fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style EFFICIENT fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style CLAIMS fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
  style LIQUID fill:#5fc9bf,stroke:#3a9d96,stroke-width:2px,color:#fff
`"
/>

The diagram above shows the DALP fund lifecycle, from tokenization through
configured servicing workflows to compliance-gated secondary-transfer support.

## Compliance considerations [#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](/docs/executive-overview/compliance-security).

## Implementation checklist [#implementation-checklist]

1. Define fund structure (equity tokens, percentage ownership model)
2. Select compliance template (qualified purchaser, accredited investor, or
   custom)
3. Integrate KYC/AML provider for institutional LP verification
4. Configure NAV update workflow and admin portal access
5. Configure tokenized distribution workflow; align fiat payment handling with
   the selected payment adapters and operating process
6. Configure AUM fee parameters and collection workflow
7. Upload fund documents (LPA, operating agreement) and link to token metadata
8. Deploy smart contract and conduct initial capital call
9. Test distribution workflow and secondary transfer restrictions

## Limitations and considerations [#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
* **Legal and regulatory review** – GP and LP legal counsel should review tokenized
  structure for compatibility with existing fund documents and regulatory
  frameworks

## Next steps [#next-steps]

* Review
  [SMART Protocol integration (ERC-3643)](/docs/architecture/components/asset-contracts/smart-protocol-integration)
  to understand embedded compliance
* Explore [Developer Documentation](/docs/developer-guides) for custom
  addon development guidance
* Contact your SettleMint representative to discuss a fund tokenization pilot