Transform Your Business: How Blockchain Modernizes Operations & Products
The Future of Asset Management: Embracing blockchain and Tokenization
As an advisor to both traditional finance (TradFi) and cryptocurrency-focused firms, I am particularly enthusiastic about how blockchain technology and tokenization can revolutionize asset management for the upcoming generation of investors.
Financial institutions are known for their ability to navigate complex landscapes and implement innovative strategies, managing trillions in assets across various sectors like private equity, credit, venture capital, and real estate. However, despite their advanced portfolio strategies, many still depend on outdated systems reminiscent of the fax machine era.
Investor records are often maintained in spreadsheets, capital calls are sent via email, and waterfall calculations are performed manually. Limited communication with limited partners (LPs) typically consists of quarterly PDFs and little else. The underlying technology infrastructure of these firms is fragile, opaque, and in dire need of modernization.
blockchain technology is not merely a speculative trend; it represents a contemporary financial operating system. For asset managers, it provides an opportunity to enhance fund administration and operations while unlocking new avenues for product offerings that cater to both current and future clients.
Upgrading Fund Infrastructure
Most investment firms still depend on a convoluted network of administrators, custodians, and transfer agents, each operating on separate systems and reconciling records manually at every stage of a fund’s lifecycle—from inception and fundraising to operations and closing. This manual, bespoke approach leads to errors, delays, and a lack of transparency, all while compliance and administrative costs continue to escalate.
blockchain and tokenization can address these inefficiencies by standardizing workflows among various stakeholders. A permissioned ledger shared among general partners (GPs), LPs, fund administrators, transfer agents, auditors, and others can serve as a unified source of truth for investor accounts, capital flows, and transaction histories. This eliminates fragmented systems and siloed information, allowing all parties to work from the same real-time data.
Smart contracts can automate processes such as capital calls and distributions, ensuring that payments are made accurately and transparently. The ability to tokenize and interoperate different asset types enables instantaneous settlement, removing the need for PDFs, wire delays, and human error.
These advancements are not mere gimmicks; they represent significant operational improvements. Investors can hold digital shares in funds, settle redemptions using stablecoins, and monitor yield accrual in real time. This transformation is a game-changer for cash management and operational teams, resulting in fewer bottlenecks and clearer audit trails.
blockchain and tokenization offer more than just liquidity; they present an opportunity to replace outdated systems with a streamlined, programmable foundation for fund operations.
Innovating Investment Vehicles
While blockchain is already enhancing fund infrastructure, the next exciting phase involves leveraging this technology to create entirely new products that were previously unimaginable.
Consider tokenized private credit as a prime example. Apollo’s tokenized private credit fund has successfully moved over $100 million on-chain, existing across multiple blockchains for seamless interoperability with digital custody systems. Similarly, Franklin Templeton’s Benji platform hosts tokenized money market funds on various blockchains, enabling investors to transfer shares peer-to-peer using stablecoins, earn intraday yield, and access tokenized liquidity. BlackRock’s tokenized institutional money market fund has already exceeded $2.5 billion in assets under management just a year after its launch.
These innovative products not only improve operational efficiency but also facilitate fractional ownership, secondary liquidity, and a more accessible investment structure for those seeking exposure without the traditional commitments of a limited partnership.
The most forward-thinking firms are pushing boundaries even further by developing entirely new on-chain products. For instance, on-chain yield vaults represent a novel investment strategy that executes automatically.
Companies like Veda Labs are at the forefront, creating smart contracts that stake tokenized assets, sell covered calls, lend to protocols, or arbitrage rates across decentralized finance (DeFi). This allows asset managers to offer white-labeled, branded investment strategies that automate execution while embedding compliance and fee structures directly into the protocol. This eliminates the need for spreadsheets or intermediaries, resulting in composable, auditable investment products designed for digital-native investors. Instead of relying on opaque net asset value (NAV) calculations, returns can be verified on-chain.
In essence, this marks the emergence of a new category of investment product—more transparent than an ETF, more automated than a hedge fund, and infinitely more programmable than any traditional investment wrapper.
The Urgency to Innovate
Asset managers need not abandon their core competencies; however, they must modernize their delivery methods and offerings.
blockchain technology is not a threat to private markets; rather, it is the upgrade that these markets have long awaited. It provides a means to simplify back-office complexities, reduce operational risks, and offer clients faster, smarter, and more efficient products.
The tools are available, and the infrastructure is operational. Early adopters have already demonstrated the potential of this technology. Asset managers who overlook this innovation risk falling behind, as the next generation of investment platforms is being built—on-chain, in real time, and at scale.
