New York Life Investment Management is jumping into the tokenization space through a partnership with Centrifuge.

On Tuesday, the firms announced the launch of the NYLIM Anemoy U.S. High Yield Corporate Bond Segregated Portfolio (ticker: HYB), marking NYLIM’s first tokenized offering and one of the first high-yield corporate bond strategies available onchain. 

The tokenized fund will enable eligible investors to access NYLIM’s established institutional high-yield strategy through Centrifuge’s platform, with subscriptions and redemptions settled in Circle’s USDC stablecoin. High-yield corporate bonds are also often called junk bonds, which carry higher credit risk but offer higher yields.

“We're so excited to be working with them,” Centrifuge CEO Bhaji Illuminati told The Block. “They are one of the first major insurance companies to move into tokenization. We've been working really closely with their team over the last six months to identify where there's an opportunity for them to start.”

Centrifuge's growing roster of Wall Street partners

This is not Centrifuge’s first time working with a leading Wall Street firm. The firm already works with notable partners including Apollo Global Management and Janus Henderson, supporting products such as private credit funds, treasury bill strategies, and a flagship AAA-rated CLO portfolio exceeding $700 million in assets under management.

New York Life Investment Management is an asset manager with approximately $807 billion in AUM. Illuminati said NYLIM may be its largest partner to date.

“Tokenization represents a compelling evolution in how investment solutions can be accessed, managed and distributed across both public and private markets,” said Thomas Sy, head of multi-asset solutions at NYLIM. “As investor demand continues to grow around transparency, efficiency and broader market participation, we are exploring opportunities where blockchain-enabled infrastructure can complement our existing platform and deepen the value we deliver to clients.”

“They've been thoughtful in their approach of ‘why tokenize products,’ what product to tokenize that there will be demand for from the current onchain investor audience, and then how to use that early success to then build out a case study and a plan to drive a broader tokenization strategy within the firm,” Illuminati said.

How the tokenized structure works

HYB’s underlying portfolio, investment process, and risk management will remain under NYLIM control, ensuring continuity with its traditional approach, with Centrifuge providing the tokenization technology. High-yield corporate bonds are also often called junk bonds, which carry higher credit risk but offer higher yields to compensate investors.

“We're their trusted advisor on how to think about how to use the technology, how to think about multi-chain, how to think about onchain capital allocators, how to think about creating utility around the tokens that you can't create for the off-chain equivalents,” Illuminati said. 

The NYLIM Anemoy U.S. High Yield Corporate Bond Segregated Portfolio was built as a BVI segregated portfolio, like all of Centrifuge’s fund, Illuminati noted. “We chose BVI three years ago, because it had the best regulatory clarity and structure for tokenized securities,” where fund investors become actual shareholders, have direct recourse to the underlying, and can redeem in kind. 

“We're using that fund to buy the exposure to the core underlying strategy so that we can get that tokenized version and tokenized share class represented onchain,” Illuminati said. 

Illuminati said the fund won’t be available to U.S. investors under its current Reg S structure, but is targeting experienced onchain audiences, like stablecoin issuers seeking higher yields, DeFi users building diversified or leveraged strategies with lower-volatility assets, and DAO treasury managers looking to allocate beyond basic stablecoins.

Liquidity and stablecoin risk

The fund also features a liquidity solution through a partnership with Grove, part of the Sky (formerly MakerDAO) ecosystem, to offer near-instant redemptions, Illuminati said. Centrifuge has had ties to Sky since at least 2021, when they partnered on the Blocktower Credit Fund.

Notably, Centrifuge does not carry the same stablecoin risks as some other tokenized funds, because the firm concerts the USDC it receives from investors into dollars to buy the underlying fund assets off-chain, Illuminati said. 

Centrifuge, despite being one of the largest tokenization firms, is not yet profitable, Illuminati told The Block. “We're focused on growth right now,” she said, noting the firm makes money based on the AUM of their funds by charging a basis fee — “it's an asset management model effectively."