Private Equity Tokenization: Mapping The Opportunities And Solving Confidentiality

This article is the second in a series exploring the tokenization of private equity. In a first article titled "Why Private Equity Needs Confidential Tokenization", we explained why confidentiality is essential for tokenized private equity. This second article explains how tokenized private equity can run fund shares, capital calls/NAV, secondary trading and distributions onchain—and how Zama’s fhevm uses Fully Homomorphic Encryption (FHE) to keep all sensitive data confidential.

Analyst reports from BCG and Citi project that over 4 trillion dollars of private market assets could be tokenized by 2030, up from just a few million today. Tokenization enables private equity (PE) shares to be issued as blockchain-based tokens, which simplifies investor onboarding, automates fund operations, and creates the potential for secondary transfers.

However, despite early pilots from institutions like KKR, Hamilton Lane, ADDX, and DBS, adoption remains limited. The main blockers are regulatory fragmentation and the lack of confidentiality.

Why confidentiality matters in private equity tokenization

Private equity requires strict confidentiality by design. Key data, such as who owns shares, how much capital has been committed, and how distributions are allocated, must remain private. Today, this is managed off-chain using centralized tools like eFront or Allvue.

Onchain tokenization without confidentiality risks exposing sensitive information to all participants. This is incompatible with the operational and legal constraints of private markets.

Zama’s fhevm addresses this by enabling smart contracts to compute over encrypted data using Fully Homomorphic Encryption (FHE). Fund operations such as transfers, capital calls, and distributions can be executed onchain while keeping the underlying data fully private, even from the nodes running the network.

What can be tokenized in private equity

Below is a list of PE functions already tokenized in production, and how confidentiality-preserving smart contracts can extend these use cases.

Fund shares (LP interests).

In 2022, Hamilton Lane tokenized a feeder fund using Securitize, issuing ERC-1400 tokens with KYC-based transfer restrictions. However, token balances remained publicly visible. In a traditional fund, this level of transparency would be unacceptable. Encrypted balances and transfers ensure that LP ownership remains confidential, while still enabling onchain programmability and compliance checks.

Capital calls and NAV tracking.

In Singapore, ADDX offers tokenized private funds with automated tracking of investor commitments and NAV. But this data is sensitive: it reveals fund performance and investor activity. Using encrypted computation, capital calls and NAVs can be computed privately, and personalized notifications sent to each LP without revealing the state of the fund or its other investors.

Secondary market trading.

Platforms like Securitize and INX allow for the secondary trading of tokenized fund shares. Today, these trades are publicly visible, who sold what, when, and at what price. This undermines trust and confidentiality in PE. A private trading system built with encrypted smart contracts can allow matching and settlement without revealing prices, volumes, or identities onchain.

Distributions and waterfall calculations.

Some tokenized funds, such as those from KKR, continue to rely on off-chain spreadsheets to manage performance fees and carried interest. These waterfall calculations are confidential and often complex. Running the full logic onchain, hurdles, catch-ups, and allocations, using encrypted smart contracts ensures correct execution without leaking any LP-specific information.

From legacy tools to confidential onchain infrastructure

Tools like eFront help funds operate, but they are closed, expensive, and disconnected from blockchain-based innovation. Tokenization brings programmability and interoperability, but only if confidentiality is preserved.

It is also important to note that the most relevant infrastructure for tokenized private equity is the public blockchain ecosystem. This is where innovation, liquidity, and interoperability are concentrated. While some early experiments used private or consortium blockchains, these models are increasingly considered obsolete. What gains traction today are public-permissioned blockchains: systems where transaction execution happens publicly but access can be gated via smart contract-enforced compliance. This architecture combines the strengths of public infrastructure with the compliance controls needed for regulated financial products.

The fhevm offers a way to migrate PE operations onchain within this paradigm, ensuring privacy, auditability, and regulatory alignment.

For similar applications in other financial primitives, see our article on confidential stablecoins.

Conclusion

Tokenization will expand access to private markets and bring new efficiencies, but these benefits are only achievable if confidentiality is preserved end to end.

Zama’s fhevm allows capital calls, distributions, and fund governance to run onchain in a fully encrypted way, combining the compliance requirements of traditional finance with the automation and transparency of blockchain. Confidential smart contracts are the missing infrastructure for making private equity truly work on-chain.