Tokenisation could save asset managers over USD $135 billion

Calastone has published research indicating that tokenisation could provide substantial cost savings for the asset management sector, potentially unlocking over USD $135 billion in efficiency gains.

The research, entitled "Decoding the Economics of Tokenisation: Transforming Cost Dynamics in Asset Management", provides an in-depth economic analysis of fund operating costs, assessing processes from front office trade execution to back office fund accounting and reconciliations. Involving 26 global asset managers from regions including the UK, Europe, Asia, and the USA, the study investigates how tokenisation might address inefficiencies in fund issuance, as well as administration and distribution.

The study estimates that tokenisation could lead to operational cost reductions of 23% (or 0.13% of Assets Under Management, AUM), potentially boosting profitability and expediting time-to-market for new funds. Key financial benefits identified include a USD $135.3 billion saving across major fund types and a P&L improvement of USD $3.1 million to USD $7.9 million per average fund. This includes an estimated revenue increase of USD $1.4 million to USD $4.2 million per fund driven by more competitive Total Expense Ratios (TERs).

The research also highlights a potential acceleration in fund launch processes, with the current timeline of 12 weeks possibly shortened by three weeks through tokenisation. This change would grant asset managers a competitive advantage by facilitating quicker access to new distribution channels.

Additionally, the requirement for seed funding, currently averaging USD $50.3 million per fund launch, could be reduced by 24% (USD $12.2 million), easing financial burdens for both firms and investors, and supporting more agile market entry for new funds.

Calastone has positioned its Digital Investments solution as a service to support asset managers in the transition to tokenisation, facilitating both cost optimisation and the integration of tokenised investment vehicles.

Brian Godins, Chief Commercial Officer at Calastone, commented: "Tokenisation is already becoming a core pillar of strategy for asset managers, offering a path to greater efficiency, flexibility, and competitiveness. Our research highlights the scale of the opportunity, with tokenisation capable of unlocking over USD $135 billion in cost savings and streamlining fund issuance, administration, and distribution."

He continued: "While adoption will be incremental, the direction of travel is clear - tokenisation represents the next stage in the evolution of investment vehicles, building on the legacy of mutual funds and ETFs. As firms explore its benefits, we expect to see a gradual integration alongside existing structures, enabling asset managers to modernise at their own pace. At Calastone, we are committed to supporting this transformation, equipping asset managers with the tools and expertise to fully harness the value of tokenisation."

The methodology behind this research involved surveying 26 asset managers globally, focusing on the economic impact of tokenisation across various fund structures. Participants provided fund-level data covering costs of setting up and operational aspects including front-office trade execution and middle-office compliance.

By capturing the perspectives of asset managers, the research uncovers the perceived benefits of tokenisation, such as reduced costs for launching new funds, quicker market entry, and improved profitability. The findings reflect current opinions on how tokenisation could shape the future trajectory of fund management.