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Fund tokenisation is coming soon to a jurisdiction near you: Article

Tokenised funds exist already in the United States and Singapore. Asset managers are not only issuing tokenised funds but backing projects whose ambition is to facilitate the large-scale tokenisation of shares in mutual funds. What are the benefits they see?

At this event, the coming tokenisation of the mutual funds industry will be discussed, in terms of the incentives to change, the techniques employed and the timetable by which it will proceed.

Whenever and however it happens, it will be a seismic transformation. According to the Investment Company Institute, there were at the end of June 2022 a total of 152,888 funds in existence around the world, worth a total of US$64.4 trillion.

And the case for change is powerful. Mutual fund managers face challenges of profitability which existing methods of efficiency – automation, outsourcing and offshoring – cannot solve.

It is why asset managers throughout the world – including eight leading organisations in London – are now investing in tokenisation, and not just of funds but of securities as a whole.

They sense that shifting funds on to a blockchain-based operating model will streamline the infrastructure that separates fund issuers from fund investors, cutting costs to the benefit of both.

It follows that existing intermediaries – such as transfer agents, fund accountants and fund platforms – must adapt their existing businesses to a tokenised future, or face extinction.

This event will explore the implications of tokenisation for all participants in the mutual fund industry: issuers, intermediaries and investors.

The issuance, distribution, trading and settlement of tokenised investment funds is happening already and is likely to spread throughout the mutual fund industry in the near future.

Anybody working at an asset manager, wealth manager, fund platform, transfer agent, order-routing network, fund administrator, depositary or custodian bank or paying agent needs to understand what is happening.

This event will explore why change is necessary; how tokenisation is implemented; what regulators think; where it is happening already; what the benefits are; and how and how soon it will happen.

Register below for the panel discussion on November the 30th

The panel discussion topics to be covered:

  1. What incentives do asset managers have to switch to a tokenised fund model (e.g., reduced operational and distribution costs, improved investment performance, reach new classes of investor)?
  2. Which intermediaries (fund platforms, registrars/transfer agents, order-routing networks, fund accountants, depositary banks, custodian banks, paying agents) are most at risk of disintermediation?
  3. How should intermediaries threatened with disintermediation respond (e.g., Calastone and FinSwitch are building blockchain-based networks, custodian banks developing digital wallet services for investors)?
  4. How do regulators currently treat fund tokens (e.g., as securities) and payment tokens (e.g., as e-money or as Stablecoins) and what are the consequences (e.g., a UCITS fund cannot invest in unregulated assets)?
  5. What regulatory constraints does the tokenisation of funds face (e.g., under CASS, UCITS, AIFMD, the 1940 Investment Company Act and e-money regulations)?
  6. Is the limited regulation of the cryptocurrency and DeFi markets a constraint on making rapid progress in the tokenisation of funds?
  7. Which jurisdictions are most accommodating to fund tokenisation?
  8. To what extent is legal uncertainty (e.g., over the status of tokens and smart contacts) an obstacle to progress?
  9. How will fund events (e.g., income distribution, fee deductions, new share classes) be serviced?
  10. Does tokenisation make real-time Net Asset Value (NAV) calculations possible?
  11. Can Stablecoins and/or Central Bank Digital Currencies (CBDCs) help?
  12. Does it make sense for asset managers to issue Stablecopins?
  13. What are the consequences of introducing atomic settlement (which requires pre-funding) to the funds industry?
  14. Is netting of fund transactions ahead of settlement possible in a tokenised model?
  15. Will fund tokenisation networks be public or private/permissioned?
  16. What are the benefits for investors (e. g., wider range of investable assets, enhanced liquidity in illiquid asset classes, personalisation of portfolios)?
  17. Can compliance (e.g., AML, CFT and sanctions screening checks, distribution limitations, mis-selling checks) be automated by smart tokens embedded in tokens?
  18. In theory, secondary markets can replace fund issuers as way of exiting funds. Is tokenisation enough to create liquid secondary markets or will other steps be necessary?
  19. Can assets be tokenised as well as fund shares?
  20. Can tokenised funds be lent or used as collateral to raise credit?
  21. Can Exchange Traded Funds (ETFs) settle in tokenised form rather than in kind?
  22. What funds have been tokenised already – and where?
  23. What type of funds (e.g., ETFs, infrastructure funds, privately managed asset funds) are likely to tokenise first?
  24. Can funds be tokenised in one country – or must tokenisation proceed on a global scale (e.g., because funds are distributed globally)?
  25. Will existing funds migrate to a tokenised model or co-exist alongside tokenised funds?
  26. Can migration of existing funds be accomplished by adding tokenised share classes to existing funds?
  27. Will funds as we know them disappear and be replaced by personalised digital portfolios issued, traded and serviced entirely by digital means?