This blog post distills key insights from the whitepaper Tokenized Funds: The Third Revolution in Asset Management Decoded, authored by Boston Consulting Group (BCG), Aptos Labs and Invesco. Thanks to Boston Consulting Group (BCG), Aptos Labs, and Invesco for shedding light on the immense potential of tokenized funds!

TL;DR - The BCG report Tokenized Funds: The Third Revolution in Asset Management Decoded explores how blockchain-powered tokenized funds are transforming the asset management industry, with tokenized funds projected to capture $600 billion AUM by 2030. 

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Tokenized funds—digital representations of fund ownership recorded on blockchain—are reshaping traditional investment paradigms. Following mutual funds and ETFs, tokenized funds represent the third major revolution in asset management, promising enhanced transparency, reduced costs, and expanded access.

At InvestaX, as a licensed tokenization platform serving global issuers and investors, we believe tokenized funds are more than just an evolution—they are the key to unlocking the future of finance.

What Are Tokenized Funds?

Fund tokenization uses blockchain to create digital tokens representing ownership in funds. Similar to mutual funds and ETFs, they offer investors access to professionally managed portfolios. However, they go further by integrating blockchain’s transformative capabilities:

• Instant settlement: Reduced from the T+2 or T+3 cycles to near-real-time.
• 24/7 liquidity: Enabling continuous trading, unlike traditional funds bound by market hours.
• Fractionalization: Allowing more investors to participate with smaller investments.
• Enhanced programmability: Smart contracts automate processes, from portfolio rebalancing to regulatory compliance.

These features are not just incremental improvements; they represent a reimagining of how assets are managed, distributed, and monetized.

A Trillion-Dollar Opportunity

Tokenized funds have already demonstrated significant momentum. In late 2024, the assets under management (AUM) of tokenized funds surpassed $2 billion, driven by increasing investor demand. With projections estimating tokenized funds could capture $600 billion by 2030, their growth mirrors the rapid adoption of ETFs in the 1990s.

Regulatory acceptance of on-chain money, such as stablecoins and central bank digital currencies (CBDCs), could push these figures even higher, making tokenized funds a potential trillion-dollar market in the long term.

How Tokenized Funds Create Value for Investors and Financial Institutions

For Financial Institutions

Asset and wealth managers can use tokenized funds to:

• Tap New Investor Pools: Virtual asset owners represent $290 billion in potential demand, with trillions more to come as regulated on-chain money adoption grows.
• Enhance Distribution Models: Secondary market trading and embedded investing expand fund reach. By leveraging blockchain, managers can offer micro-investing opportunities and 24/7 execution, attracting younger, tech-savvy investors.
• Personalize Portfolios: Smart contracts enable hyper-customized portfolios, such as ESG-compliant or sector-specific funds, increasing investor engagement and retention.
• Boost Revenues: Secondary tokenized markets could achieve $200 trillion in annual turnover if tokenized funds emulate ETF trading patterns.

For Investors in General

Tokenized funds streamline inefficiencies and introduce value-added capabilities that were previously unattainable in traditional funds:

• Increased Returns: By reducing operational costs and unlocking trapped capital, tokenized funds could deliver an estimated $100 billion in additional returns annually to mutual fund investors. Sophisticated investors leveraging intra-day NAV fluctuations could realize up to $400 billion annually.
• Reduced Costs: With lower transaction fees closer to ETF levels (about 0.09%), tokenized funds could save investors approximately $33 billion annually.
• Better Liquidity: Near-instant collateralization via smart contracts allows tokenized funds to be used as collateral for loans, unlocking $12 billion annually in potential lending income.

The Adoption Tipping Point: The Next 12–18 Months

The adoption of tokenized funds is nearing a critical inflection point. The next 12–18 months will see pivotal developments as:

• On-Chain Money Gains Traction: Stablecoins, tokenized deposits, and CBDCs are becoming mainstream. These instruments provide the necessary infrastructure for tokenized fund ecosystems.
• First Movers Gain Ground: Firms like BlackRock and Franklin Templeton have already launched tokenized money market funds with considerable success. These examples show how early adopters are carving out market share and economies of scale.
• Regulatory Clarity Improves: Key financial centers such as Hong Kong, Singapore, and the UK are piloting sandbox initiatives to support blockchain innovation. Regulatory frameworks will create the guardrails needed for mass adoption.

This flywheel effect, combining investor demand, regulatory alignment, and technological advancement, will accelerate the growth of tokenized funds.

Blueprint for Tokenization Success

To fully capitalize on this revolution, financial institutions must develop foundational capabilities:

• Regulatory Compliance: Clear guidelines on KYC/AML, digital asset custody, and tokenized fund operations are critical.
• Technology Standards: Ensuring cross-chain interoperability and efficient blockchain use is essential for scalability.
• Smart Contracts for Customization: From personalized portfolios to purpose-bound investments, programmable money and smart contracts unlock new business opportunities.
• Ecosystem Collaboration: A globally aligned effort involving regulators, asset managers, and technology firms will ensure seamless fund tokenization.

Developing a Vision For Tokenized Finance

Tokenized funds are not a distant prospect; they are here now, driving measurable value for investors and institutions. The next few years will determine how the financial industry evolves, with tokenized funds poised to redefine asset management globally.

The full version of the whitepaper Tokenized Funds: The Third Revolution in Asset Management Decoded is available here.

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Get Started with Fund Tokenization on InvestaX

InvestaX stands out as Asia’s first licensed tokenization platform, blazing a trail in the fund tokenization movement. Our tokenization SaaS platform combines robust regulatory compliance with cutting-edge blockchain technology to tokenize real-world assets, including funds, for global accessibility.

Since 2018, we’ve achieved significant milestones in fund tokenization, including:

• Pioneering the first-ever Proof of Concept (PoC) for tokenizing the Singapore Variable Capital Company (VCC) structure, in collaboration with industry leaders like UBS and PwC Singapore. Learn more here.
• Launching a diverse range of tokenized funds on our platform, including VC, Real Estate fund, and Commodity funds. Explore them here.

Ready to lead the next revolution in asset management? Contact InvestaX today to explore how tokenization can transform your investment strategy.