In the December 2021 Calastone Connect Forum, experts considered how exchange traded funds and tokenised funds could, and potentially should, become part of every treasurer’s asset class armoury for managing liquidity. Ed Lopez, Chief Revenue Officer, Calastone; Patrick Kunz, Treasury, Finance & Risk Consultant and Interim Treasurer, Pecunia Treasury & Finance; and Natacha Blackman, Fixed Income Product Strategist for iShares ETFs, BlackRock, pondered the possibilities.
There has been much talk of tokenised funds in recent months but there appears to be some confusion as to what they are and the panel was keen to put the record straight. Indeed, it was noted that talk of tokenised funds typically turns to blockchain and assumptions that they equate to crypto and Bitcoin, noted Lopez. “But that’s not what tokenised funds are,” he stated. Tokenised funds, he explained, do use DLT to secure sensitive fund data, but while DLT is fundamental to both tokenisation and crypto, it is important to see the difference.
Tokenisation requires tools) to create and distribute tokens, offering new advantages from a fund manager and asset manager perspective by removing much of the operational burden, and therefore cost, clarified Lopez. “By replacing legacy processes, asset managers can concentrate on their core business, offering value and choice to investors.”
In fact, tokenisation of underlying assets enables tokens to be creatively mixed, in the same way that ETFs (exchange trade funds – see below) can be. This facilitates investment optionality. By enabling bespoke investments, individual investors can focus on what matters to them, many, for example, now tailoring investments to meet their ESG goals.