Tokenized Funds: The Third Revolution in Asset Management Decoded

This report is co-authored by:

Aptos Labs: Alexandre Tang, Solomon Tesfaye
Invesco: Ken Lin, David Reed

Amid all the hype over Generative AI, interest in distributed ledger technologies (DLT) seems to have waned over recent months. But in the financial services industry, DLT-based solutions are attracting increasing levels of interest. Through an innovation called fund tokenization, the technology’s many advantages are finding a new home in the asset management space, where they can boost value creation, increase transparency, and streamline transaction processing. When combined with smart contracts, which automate various aspects of business logic, it’s clear why market participants are eager to participate.

Fund tokenization – which we call the third revolution in asset management – offers the potential to create billions of dollars in value for both financial institutions and end investors. In late 2024, tokenized funds had garnered more than US$2 billion in assets under management (AUM)¹. Over the coming period, we expect demand to continue rising, especially when regulated on-chain money (such as regulated stablecoin), tokenized deposit, and central bank digital currency (CBDC) projects materialize.

In this report, we provide industry practitioners with an overview of the emerging market in fund tokenization, highlighting what the technology can achieve in practice, the incentives for end-investors and financial institutions, a potential tipping point for rollout, and how fund managers can capture opportunities.

1. AUM consists of funds issued by BlackRock, Franklin Templeton, WisdomTree. Data of October 2024.