The government and authorities should approve tokenized funds that use blockchain technology, according to a call made by the British Investment Association on July 7th. These funds might make it simpler for individual investors to purchase illiquid assets. By dividing their assets under management into parts, tokenized funds enable a lower minimum spend, making them more accessible to novice investors.
According to experts in the field, using blockchain technology, which supports cryptocurrencies, to support tokenized money can also lower operating costs. According to Chris Cummings, CEO of the Investment Association, with the constantly accelerating speed of technological development, the investment management industry, regulators, and politicians must work together to drive forth development without delay.
The Financial Conduct Authority and the government should provide a framework for the management of tokenized funds, the IA said in a statement.
The IA further stated that regulators should evaluate whether cryptocurrencies are acceptable in investment funds with well-diversified portfolios. One of the top asset managers exploring the introduction of tokenized funds is Abrdn. In a statement, an abrdn representative said that they are considering tokenization and are now evaluating how the advantages of blockchain technology could be used in the regulated funds market.
Because secondary token markets offer better liquidity and lower investment minimums, tokenized solutions should make it easier for both novice and experienced investors to buy investment goods, including those in the illiquid market. The London Stock Exchange and four asset managers are collaborating with fund technology company FundAdminChain on tokenized funds. Brian McNulty, CEO of FundAdminChain, declined to identify the managers.
Through the Singapore digital securities market ADDX, investors have been able to purchase tokens in a fund operated by private equity company Partners Group since last year. Instead of the usual minimum investment of $100,000, investors can enter with a $10,000 outlay.
The worldwide Financial Stability Board has cautioned that, notwithstanding tokenization, individual investors remain vulnerable to any underpinning illiquid assets, such as commercial real estate and private equity, which are challenging to exit quickly in the event of a market decline.