How tokenization in asset management is driving meaningful opportunity

In brief

• Tokenization, the process of using blockchain technology to convert an asset or ownership rights of an asset to digital form, is drawing substantial interest.
• Investors indicate they are interested in allocating 7% to 9% of their full portfolio to tokenized assets by 2027.
• Investing in tokenized alternative assets, particularly real estate and private equity, is an area of interest for institutional and high-net-worth investors.

Tokenization, the process of converting an asset or the ownership rights of an asset to a digital form using blockchain technology, has gained significant traction throughout the financial services industry. Investors suggest they may allocate 7% to 9% of their entire portfolio to tokenized assets by 2027. Seeing this opportunity, some of the largest financial services companies are investing heavily in the space and bringing offerings and investments to market.

To gain a deeper understanding of investor sentiment, preferences and plans regarding tokenized assets, EY-Parthenon practice conducted two surveys encompassing 251 accredited/high-net-worth (HNW) investors and 78 institutional asset investors in the United States. The HNW investor group consisted of those with >$1m in investable assets and the institutional segment comprised asset owners, including endowments, pension funds, foundations, family offices, insurance general accounts and sovereign wealth funds (with assets under management (AUM) ranging from >$500m to <$50b). The results revealed valuable insights that shed light on the attitudes and intentions of these investors, insights that may help asset managers and other financial services companies in preparing for increased demand and allocation.

Click here to view and download the full survey : PDF (2 MB)

Asset tokenization

HNW and institutional investors are overwhelmingly interested in tokenized assets, with 17% of respondents already investing in them, 25% planning to invest in them and 35% expressing a keen interest in learning more about this asset class. Furthermore, 55% of the surveyed investors expressed plans to allocate funds to tokenized assets within the next one to two years. Their motivation for this strategic move stems from the perceived advantages associated with tokenization, including increased liquidity, lower transaction costs, improved performance and enhanced transparency.

In terms of asset allocation, institutional investors are projected to allocate 5.6% of their portfolios to tokenized assets by 2026. HNW investors anticipate an even higher allocation of 8.6%. This suggests that HNW investors are at the forefront of adopting tokenization, with smaller institutions and investors leading the way. These projections highlight the increasing significance of tokenized assets as a component of investment portfolios, as both institutional and HNW investors recognize the potential value and benefits they offer.

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