- Responses from fund managers with assets under management totalling more than £8.5tr highlights that the UK industry believe digital assets represent an evolution to the current investments landscape, rather than an all-out digital revolution.
- The survey’s findings were exclusively announced to the Investment Association’s members at its TechTalk event that took place in London last week, where the Investment Association also launched the first phase of its implementation plan for UK fund tokenisation following its work with industry and the FCA as part of the HM Treasury Asset Management Taskforce.
Large fund managers in the UK are cautiously planning to increase their issuance of digital assets in the next decade, but a lack of industry collaboration coupled with regulatory constraints remain the biggest sticking points before the technology can become more mainstream, new research reveals.
The study*, which was undertaken by the Investment Association and financial software specialist Bravura, aimed to gain a view of asset managers’ current and future plans to launch digital assets.
It found that current appetite for the inclusion of tokenised assets is constrained by limiting factors, but a clear intention is demonstrated, with over half of respondents planning to hold some form of tokenised asset within the next one to ten years.
Around one in three respondents (29%) state they expect to offer tokenised funds within the next one to five years. This figure is likely to rise following the confirmation last week from the FCA that there are no significant regulatory barriers to adoption in the context of industry’s blueprint model for tokenisation**.
When looking at the perceived benefits of digital assets compared with conventional investment instruments, respondents believed the biggest boon was improving trading, settlement and liquidity, followed by lowering costs. Other benefits include making the process simpler for everyone and providing greater flexibility to create financial products.
The results, of the survey, conducted before the blueprint was announced, show that a lack of effective industry collaboration is, however, slowing down innovation and uptake, and the overwhelming majority (85%) of respondents believe this to be the biggest barrier to wider adoption. This is then followed by a lack of effective regulation (79%) and wider uncertainty and prioritising other projects (50%).
John Allan, Head of Innovation & Operations Unit, the Investment Association, said: “The potential of digital assets and its associated technology holds significant implications for investment firms. The recent work on fund tokenisation via the Asset Management Taskforce exemplifies the successful collaboration between the industry, the broader funds ecosystem, and the UK authorities. This serves as a model for collaboration in broader areas, such as the utilisation of digital assets and digital forms of money in investment portfolios. We are already collaborating with the sell-side to ensure that the UK maintains its competitiveness in this rapidly evolving field.”
Ian Hutchinson, Head of Growth EMEA, Bravura, said: “It’s clear from the survey that whilst UK fund managers believe digital assets will be a significant investment class, they will co-exist with other types of conventional investments in the future. This is very much an evolution towards a new, more efficient way of investing and it’s reassuring to see some activity in this area from the largest fund managers in the UK. And with regulation catching up with innovation following the Asset Management Taskforce’s recently published implementation blueprint, I imagine we’ll only start to see more interest in this potentially groundbreaking technology for funds administration.”
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