In the evolving landscape of global finance, 2025 has become the “tipping point” for fund tokenization. What was once a buzzword in blockchain circles is now a strategic priority for the world’s largest asset managers, including BlackRock, Franklin Templeton, and JPMorgan.
But why are the industry’s heavyweights moving their funds on-chain? If you are a fund manager, here is why you should be considering tokenization—and how it can redefine your operational model.
What is Fund Tokenization?
At its core, fund tokenization is the process of converting shares or units of an investment fund into digital tokens on a distributed ledger (blockchain). These tokens represent a direct claim on the underlying assets, mimicking the functionality of traditional shares but with the added power of smart contracts.
While the underlying valuation (NAV) remains the same, the “plumbing” of the fund is upgraded from legacy manual systems to a programmable, digital-first infrastructure.
5 Reasons Fund Managers Should Adopt Tokenization
1. Reaching New Distribution Channels
Tokenization allows you to distribute your products through digital-native channels. By 2027, institutional investors are projected to allocate nearly 10% of their portfolios to tokenized assets. Being “on-chain” makes your fund compatible with the digital wallets and platforms where the next generation of capital is congregating.
2. Drastic Operational Efficiency
Traditional fund administration is bogged down by manual reconciliations, multi-day settlement cycles ($T+1$ or $T+2$), and a heavy reliance on intermediaries.
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Atomic Settlement: Tokenization enables “delivery versus payment” (DvP), where the transfer of assets and cash happens simultaneously and near-instantaneously.
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Automated Compliance: Smart contracts can bake KYC/AML rules and investor eligibility directly into the token, ensuring compliance is enforced automatically at every trade.
3. Lower Barriers to Entry (Fractionalization)
One of the most powerful features of tokenization is the ability to fractionalize high-value assets.
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Retail Access: You can break down a minimum $1 million investment in a private equity fund into $1,000 tokens.
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Democratization: This opens your funds to a global pool of retail and “mass affluent” investors who were previously priced out of alternative asset classes.
4. Enhanced Liquidity for Illiquid Assets
Historically, funds like real estate or private credit have been “locked up” for years. Tokenization introduces the possibility of a 24/7 secondary market.
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Peer-to-Peer Trading: Investors can trade tokens on secondary platforms without needing to wait for the fund’s next redemption window.
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Collateral Utility: Tokenized fund shares can be easily pledged as collateral in both traditional and decentralized finance (DeFi) ecosystems, increasing their “convenience yield” for investors.
5. Real-Time Transparency and Data
Legacy systems often leave managers and investors in the dark for days regarding the exact status of a share register.
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Single Source of Truth: The blockchain provides an immutable, real-time record of ownership.
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Intraday NAV: Advanced tokenization platforms allow for more frequent Net Asset Value (NAV) updates, providing a clearer picture of fund performance throughout the day.
The Market Context: 2025 and Beyond
The numbers speak for themselves. The market cap for tokenized U.S. Treasuries alone has neared $7 billion this year, and private credit tokenization has surpassed $12 billion. We are shifting from a “hybrid” model (where tokens represent traditional shares) to natively issued digital funds where the blockchain is the official share register.
“Tokenization is not a product; it’s a better way of doing business. It’s the third revolution in asset management.”
Ready to Modernize Your Fund?
The gap between early movers and laggards is widening. If you’re interested in exploring how tokenization can lower your costs and expand your investor base, let’s discuss a strategy for your first on-chain pilot.