UK asset managers demand blockchain fund regime

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LONDON, July 7 (Reuters) – The UK Investment Fund on Thursday called on the government and regulators to give the green light to tokenised funds using blockchain technology, which could make it easier for retail investors to buy illiquid assets.

Tokenised funds divide their assets under management into fractions, which enables a reduced minimum investment, which makes them cheaper for small investors.

The use of blockchain technology, which underpins cryptocurrencies, to support tokenized funds can also reduce operating costs, say industry specialists.

“With the ever-increasing technological change, investment management industry, regulators and decision makers must work together to drive innovation without delay,” said Chris Cummings, CEO of the Investment Association.

The government and the Financial Conduct Authority should establish a framework for tokenized funds to work, IA said in a statement.

Regulators should also consider the eligibility for cryptocurrencies in investment funds with well-diversified portfolios, IA added.

Abrdn (ABDN.L) is among major asset managers considering launching tokenized funds.

“We are looking at tokenization and are currently considering how the benefits of blockchain technology can be exploited in the regulated fund area,” a spokesman for abrdn said in an email.

“Tokenized solutions should provide new ways for both retail and sophisticated investors to access investment products, including in the illiquid area, thanks to lower investment minimums and improved liquidity mechanisms through secondary token markets.”

The fund technology company FundAdminChain collaborates with the London Stock Exchange and four asset managers on tokenized funds. FundAdminChain CEO Brian McNulty declined to name the leaders.

Since last year, investors have been able to buy tokens in a fund managed by the private equity firm Partners Group (PGHN.S) through the Singapore digital securities exchange ADDX. Investors can come in with an outlay of $ 10,000, instead of a typical minimum of $ 100,000.

However, the Global Financial Stability Board has warned that tokenisation continues to leave retail investors exposed to all underlying illiquid assets, such as commercial real estate and private equity, which are difficult to recover from if prices fall.

Reporting by Carolyn Cohn, editing by Huw Jones and Bernadette Baum

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