Asset managers are planning to leverage the blockchain technology behind cryptocurrencies to divide money into bite-sized units, or tokens, to sell to tiny savers, despite recent wild fluctuations by crypto investors. Bitcoin dropped 7.7% in a matter of minutes last week, following a 15% plunge in a single day in June as aggressive rate hikes by major central banks and ultra-high inflation pushed investors to flee high-risk assets.
Other difficulties are plaguing the sector, with Celsius suing a former investment manager this week for misplacing or stealing tens of millions of dollars in assets before the crypto lender went bankrupt last month. Private markets investment firms Hamilton Lane (HLNE.O) and Partners Group, on the other hand, have tokenized funds in the last year and have stated that they are investigating more products.
According to a source familiar with the situation, mainstream asset manager abrdn (ABDN.L) wants to establish a tokenized fund this year, and rival Schroders (SDR.L) is also investing in the industry. Tokens are issued in such funds through a security offering, which gives the investor the right to participate.
Proponents claim that blockchain allows tokens, or fund fractions, to be securely handled and that it can let small investors buy illiquid assets like private equity, which offer higher returns but are difficult to trade in and out of rapidly.
Some potential investors, though, are concerned about the technology’s intimate relationship with cryptocurrency. Hamilton Lane’s worldwide head of operations, Fred Shaw, stated that the firm has been assisting investors in understanding that crypto and blockchain are not the same thing.
“Blockchain is the underlying technology, but cryptocurrency is only one application of it.”
