Private Markets to ‘Leapfrog’ Other Asset Classes in Tokenization Race

Asset managers can no longer ignore the tokenization of assets, as the technology stands to shake up firms’ operating models and potentially create greater access to private market strategies, panelists said at last week’s InvestOps conference in Orlando, Florida.

Tokenized funds provide digital certificates that are bought, sold and traded on a blockchain, a digital ledger that records every transaction. Those tokenized assets replace the traditional shares an investor would own in a real estate, mutual fund or private equity fund. The technology could reduce overhead costs and manual processes associated with the issuance of funds as well as trading, administration and distribution.

Within asset management, tokenization has seen the greatest adoption in money market funds – with notable examples from BlackRock and Franklin Templeton. Managers have also begun to tokenize alternative funds, panelists said.

Tokenized alternative assets could improve operational efficiencies, enhance transparency and streamline investor onboarding and transfers, Cynthia Kelly, a managing director of compliance at STP Investment Services, said in an email. It could also help address traditional “friction points” such as limited liquidity and administrative burdens.

Read more in FundFire.