Abrdn is among the large asset managers considering launching tokenized funds.
London:
Britain’s investment trust asked the government and regulators on Thursday to give the green light to tokenized funds that use blockchain technology, which could make it easier for retail investors to buy illiquid assets.
Tokenized funds divide their assets under management into fractions, enabling a reduced minimum investment, making them more affordable for small investors.
The use of blockchain technology, which underpins cryptocurrencies, to support tokenized funds can also reduce operating costs, industry specialists say.
“With the ever-faster pace of technological change, the investment management industry, regulators and policymakers 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, the IA said in a statement.
Regulators should also consider the eligibility of cryptocurrencies in investment funds with well-diversified portfolios, the IA added.
Abrdn is among the large asset managers considering launching tokenized funds.
“We are looking at tokenization and are currently considering how the benefits of blockchain technology can be leveraged in the regulated fund space,” an abrdn spokesperson said in an emailed statement.
“Tokenized solutions should provide new ways for both retail and sophisticated investors to access investment products, including in the illiquid space, thanks to lower investment minimums and improved liquidity mechanisms via secondary token markets.”
Fund technology firm FundAdminChain is partnering with the London Stock Exchange and four asset managers on tokenized funds. FundAdminChain CEO Brian McNulty declined to name the executives.
Investors have since last year been able to buy tokens in a fund managed by private equity firm Partners Group through Singapore digital securities exchange ADDX. Investors can enter with an investment of $10,000, instead of the typical minimum of $100,000.
However, the global Financial Stability Board has warned that tokenization still leaves retail investors exposed to any underlying illiquid assets, such as commercial real estate and private equity, that are difficult to exit in a hurry if prices fall.
