The digital makeover of asset management can lead to US$135 billion ($183 billion) in potential savings across the industry. That’s the staggering figure the sector could unlock by adopting tokenisation at scale, according to a new report from Calastone, a global funds network.
The idea is to convert traditional investment vehicles into digital tokens that run on blockchain-based infrastructure, slashing the cost and complexity of issuing, trading and administering funds.
According to Calastone’s Decoding the Economics of Tokenisation report, fund operating costs amount to 0.74% of the average fund’s assets under management (AUM) and are expected to rise 32% by 2027. Asset management firms are feeling the pinch as they are now absorbing a greater share of those expenses — about 0.4% of AUM — compared to the 0.34% passed on to investors as part of the typical 0.8% total expense ratio (TER).
But as cost pressures build, the likelihood grows that firms will be forced to pass more of the burden onto investors — raising fees and eroding the competitiveness of their funds. The result: a tougher battle for market share, particularly among price-sensitive retail investors.
“In a world where margins are already thin, the increase in operating costs is really significant. The pressure is mounting not just to cut costs but to rethink the way funds are built and run,” says Andrew Tomlinson, Calastone’s chief marketing officer.
He continues: “Tokenisation is not just about putting funds on a distributed ledger technology (DLT) or blockchain. It’s about re-engineering how the fund itself operates, is administered, accounted for, and, importantly, how it’s distributed. By leveraging DLT [which is the foundation of tokenisation], asset managers can streamline their operations, automate processes and reduce inefficiencies [which can lead to] 23% reduction in operating costs, or 0.13% of AUM.”
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Chart: Calastone
Revenue opportunities
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DLT provides a transparent, verifiable and immutable record of ownership, enabling assets to be transferred without layers of manual checks and reconciliations. With everything recorded on a single ledger, updates can be executed, recorded and reconciled in near real-time. Over time, this could help fund managers manage assets more efficiently across multiple funds, reducing costs while maintaining full transparency and regulatory compliance.
By reducing their operating costs, asset managers can cut fees to boost their competitiveness and appeal, especially in fee-sensitive segments. Leaner TERs can drive stronger inflows, lift AUM and ultimately grow revenue from management fees. Lower TERs may also open doors to underserved markets, deepen investor loyalty, and free up capital to reinvest in distribution and product innovation.
Beyond the cost of doing business, asset managers want to move more quickly and respond with agility to changing customer needs. They expect tokenisation to set up funds more quickly and cost-efficiently.
Today, launching a new fund takes an average of 12 weeks and requires around US$50.3 million in seed capital. That timeline stretches to 14 weeks and US$63.5 million for cross-border funds, where managers must navigate multiple regulatory regimes and build out infrastructure in different countries.
With tokenisation, fund launches could be completed in just nine weeks, cutting setup times by as much as 31%. Seed capital requirements also drop to around US$38.1 million, slashing launch costs by nearly a quarter, according to Calastone’s report.
Real-world tests
Tokenisation isn’t just for crypto start-ups; it’s being tested by the incumbents. Some asset managers are beginning their tokenisation journeys by launching tokenised funds within specific asset classes, with Calastone’s study reporting that money market funds are the popular starting point. In 2021, Franklin Templeton debuted the first tokenised money market vehicle, and last year, it enabled peer-to-peer transfers for fund shareholders.
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Meanwhile, Schroders is collaborating with the Monetary Authority of Singapore (MAS) and Calastone to explore the capabilities of a tokenised investment vehicle for Variable Capital Companies (VCCs), a common fund structure in Singapore. This initiative aims to allow clients to improve the personalisation of their investment solutions while simplifying operations through blockchain technology. It supports Project Guardian, MAS’s collaborative initiative between policymakers and the financial industry to enhance the liquidity and efficiency of financial markets through asset tokenisation.
The collaboration between Schroders and Calastone will also explore asset ownership linked to blockchain technology that could provide more cost-efficient investment allocation for retail and institutional investors.
“Tokenisation brings forth two fundamental advantages: synchronised data and heightened automation. Moreover, it expands accessibility and enables customisation, providing investors with more options. Managed in a responsible way, we think this is good for clients and for the market,” says Marita McGinley, Schroders’s head of digital assets strategy.
She emphasised that tokenisation could lead to composable finance or portfolios that can be componentised into building blocks and built as required. Here’s how it would work: Tokens can represent a client’s unique investment needs, including wealth goals, risk tolerance and their need for more certain cash flows to support key life events. Asset managers compete to create tailored products that align with these specific needs.
The winning asset manager would design a customised investment strategy — potentially involving tokenised assets like stocks, bonds, alternatives, and even fractional ownership — to address the client’s growth and cash flow objectives directly. These investments would remain adaptable, allowing adjustments as client needs evolve.
By leveraging smart contracts on the blockchain, these tokens become self-executing, simplifying settlement management, asset servicing, and order execution. This reduces friction and ensures secure, transparent, and immutable transactions. In this framework, while the asset manager continues to orchestrate the process, the investment journey is entirely driven by the client.
Adoption woes
Although the long-term benefits of tokenisation are clear, the road to this end state will not be short or straightforward.
“Our study revealed five main barriers to adoption which are technology limitations, unclear business case, deployment costs, lack of internal expertise and external adoption by counterparties. What’s interesting here is that the biggest blocker isn’t tech itself, but it’s uncertainty around the business case at the starting point. We’re also seeing asset management firms taking a phased approach, which shows us the most realistic and strategic part to adoption,” says Tomlinson.
Calastone is dedicated to facilitating the transition to a future where many asset managers will operate large parts of their businesses on DLT. It most recently launched Calastone Tokenised Distribution, which allows asset managers to tokenise any fund operating on Calastone’s network and distribute it seamlessly across blockchain-based channels.
The solution bridges the gap between traditional investment funds and blockchain-native networks such as Ethereum, Polygon and Canton, where investment activity is increasingly executed and settled using digital assets.
It targets a new class of investors largely untapped by conventional distribution channels, including:
- Corporate treasurers managing substantial on-chain cash balances for yield and efficiency
- Stablecoin issuers and institutional crypto firms seeking regulated investment options without the need to convert into fiat currencies
- Crypto-experienced retail and wealth investors who want access to traditional assets via the same wallets and digital infrastructure they use for digital assets
By tokenising fund shares on these blockchains, asset managers gain direct access to these new capital pools without overhauling existing operational frameworks.
This solution leverages Calastone’s established global network of over 4,500 firms across 56 markets, enabling the tokenisation and distribution of any share class via public, hybrid, or private blockchains. On-chain orders are seamlessly translated and processed through Calastone’s infrastructure, ensuring compatibility with traditional fund operations.
As such, asset managers can expand into blockchain-native investor channels with no operational disruption and reduce distribution costs via automation and smart contracts. They can also maintain existing service provider relationships and position themselves for long-term advantage in an evolving investment landscape.
“The investment world is changing fast. New pools of capital are forming on blockchain networks, and they are not being accessed through traditional channels. Our Tokenised Distribution solution gives asset managers instant reach into these markets without the requirement or need for transformation. We are making it easy to evolve with the market,” says Julien Hammerson, CEO of Calastone.
