With Luxembourg’s regulatory stability serving as a global launchpad, the industry is moving toward a B2C distribution model that promises to fundamentally reshape the value chain. While tokenised assets currently represent a modest 0.02% of the total market, the consensus on the panel “Asset Management On-Chain: From Tokenisation to Distribution” at Nexus was clear: tocapture the next generation of investors and achieve a return on investment, firms must move beyond the buzzwords and “start now” with tangible use cases.
Blockchain brings real-time fund ownership
The transition towards fund tokenisation represents a significant shift in the asset management industry, often debated as either an evolution or a revolution, noted the moderator, Isadora Pardo, senior VP of industry affairs at the Association of the Luxembourg Fund Industry (Alfi). This transition is driven by the demand for enhanced efficiency, data immutability, and a more secure environment, she added.
Leading institutions view blockchain as a new generation of ledgers that are inherently faster and safer than traditional systems. A key utility of this technology is the ability to provide instant transfer of fund shares and “yield on record,” allowing investors to receive yields as soon as they acquire a share, according to Gregory Surply, associate general counsel, at Franklin Templeton.
Blending traditional and tokenised funds
To facilitate this, CACEIS has implemented a hybrid transfer agency model, which combines tokenised fund shares with traditional shares within an integrated register, explained Sorin Jitaru, a digital assets senior expert in the firm. This approach allows mainstream funds, such as money market funds, to test blockchain distribution while maintaining their existing connectivity and know-how.
Within this framework, infrastructure providers like State Street treat clients as “co-creators” to ensure solutions are interoperable with traditional business models and remain jurisdiction-agnostic, stressed its head of transfer agency product and business, Sébastien Rouyr.
Tokenisation strategies begin to diverge
Current initiatives often follow two distinct paths: tokenising the underlying assets of the mutual funds “to give investors greater decision-making power,” or tokenising money market funds to provide fintech and corporate clients with faster, more secure cash management tools, explained Anthony Dahan, head of client onboarding and oversight, at Pictet Asset Management.
For successful implementation, firms must define a clear strategy regarding target assets and clients, while carefully navigating the legal framework, stressed Dahan, especially in cross-border contexts. Furthermore, institutions must develop the technical capacity to manage smart contracts, which is a departure from traditional transfer agent functions.
Scale remains tokenisation’s biggest test
Despite the potential, broad adoption remains a challenge. Consequently, Rouyr stressed that scaling is essential for achieving a return on investment and proving the cost-reduction benefits that investors expect. This growth is supported by a shift in investor demographics, as a new generation of “digital natives” seeks to manage investments as easily as cash for purposes like collateralisation, observed Surply.
Luxembourg emerges as tokenisation hub
Luxembourg has emerged as a primary hub for these initiatives due to its regulatory clarity, stability, and pool of expertise. The ecosystem is fostered by a regulator that actively supports innovation, which is vital for building the trust necessary for widespread investor participation. As the industry matures, there is an increasing move from B2B models toward B2C distribution, potentially removing traditional intermediaries, noted Dahan.
Ultimately, the path forward requires continuous education and upskilling of both staff and investors to demystify the technology. Key next steps for the industry include collaboration, technology adoption, and the identification of specific use cases that deliver tangible value to the investor journey.
