Tokenization – the process of transforming asset ownership into digital tokens on a blockchain – holds the potential to unlock over US$135 billion in cost savings for the asset management industry, a new study reveals.

Meanwhile, fund processing costs are projected to rise by 32% over the next three years, putting firms under increasing pressure to modernize.

By leveraging tokenization, asset managers could cut operational costs by 23%, or 0.13% of assets under management ( AUM ), while also accelerating speed to market of new fund launches and improving overall profitability, global funds network Calastone says in Decoding the Economics of Tokenisation: Transforming Cost Dynamics in Asset Management.

The research analyzes fund operating costs – from front office trade execution to back office fund accounting and reconciliations – and explores how tokenization could eliminate long-standing inefficiencies in fund issuance, administration, and distribution. The study covers 26 global asset managers in the United Kingdom, Europe, Asia and the United States.

Other key findings:

• For the average fund, tokenization could deliver a total profit and loss improvement of between US$3.1 million and US$7.9 million, including increased revenue estimated at US$1.4 million to US$4.2 million per fund based on more competitive total expense ratios.
• It currently takes 12 weeks to launch a new fund. Tokenization could reduce this timeline by three weeks, giving asset managers a competitive advantage by enabling quicker access to new distribution channels.
• On average, fund launches currently require US$50.3 million in seed funding. Tokenization could reduce this figure by 24% ( US$12.2 million ), easing the financial burden on firms and investors and enabling more agile fund launches.

Tokenization and the adoption of tokenized, digitally native investment products represent the future of the asset management industry, according to the study. By embracing this evolution, investment managers can better address the needs of investors, enhance efficiency, and unlock new opportunities for growth.

"While adoption will be incremental, the direction of travel is clear – tokenization represents the next stage in the evolution of investment vehicles, building on the legacy of mutual funds and ETFs,” says Calastone’s chief commercial officer Brian Godins.

“As firms explore its benefits, we expect to see a gradual integration alongside existing structures, enabling asset managers to modernize 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 tokenization."