Blockchain can modernize the asset management operation model and revitalize the product system.

Author: Tuongvy Le, Source: Coindesk, Translated by: Shaw Golden Finance

As an advisor to traditional finance (TradFi) and cryptocurrency native enterprises, I am excited about the potential of blockchain and tokenization, as it can help asset management firms serve the next generation of investors.

These financial institutions take pride in navigating complex situations and pursuing innovative strategies. They manage trillions of dollars in funds across private equity, credit, venture capital, and physical assets. However, despite their expertise in portfolio construction, many institutions still rely on infrastructure that is more suited to the fax machine era.

Investor records are kept in spreadsheets, and capital raising is conducted via email. Waterfall calculations are done manually. Limited partners receive PDF documents quarterly, and nothing else. The technology infrastructure of these companies is weak and opaque, and in urgent need of significant upgrades.

Blockchain is not a means of speculation, but a modern financial operating system. For asset managers, it not only provides opportunities for modern fund management and operations but also opens up new areas for expanding product types and better serving existing and future client groups.

Modern Fund Infrastructure

Most investment firms still rely on complex managers, custodians, and transfer agents, each using their own systems to manually verify records at each stage of the fund lifecycle (including establishment, preparation, fundraising and introduction, operations, trading and liquidity, and liquidation). Due to the fact that most of these processes are manual and customized, they are prone to errors, frequent delays, low transparency, and rising compliance and management costs.

Blockchain and tokenization address these inefficiencies by standardizing workflows among multiple participants. A permissioned ledger shared among general partners, limited partners, fund managers, transfer agents, auditors, and other parties can serve as the sole source of truth for investor accounts, fund flows, and transaction histories. This eliminates fragmented systems, isolated information, and weekly reconciliations, allowing everyone to operate based on the same data, which is updated in real-time and visible.

Smart contracts can automatically execute fund calls, allocations, and even complex waterfall logic, ensuring that the correct amounts are paid promptly and transparently to the right counterparties. Moreover, the tokenization and interoperability of different asset types enable automation and instant settlement, without worrying about PDF files, wire transfer delays, and human errors.

These are not gimmicks, but operational upgrades. Investors can hold digital fund shares, redeem them in stablecoins, and track the accumulation of returns in real time. This is a disruptive change for cash management. For the operations team, it means reducing bottlenecks and having clearer audit processes.

Blockchain and tokenization are not just about liquidity; they also provide an opportunity for fund operations to replace cumbersome and piecemeal systems with a streamlined, programmable infrastructure.

Next Generation Investment Tools

If blockchain is already revolutionizing the infrastructure of funds, then the next frontier is even more exciting: using this technology to create unprecedented products.

Let's start with tokenized private credit. Take a look at Apollo's tokenized private credit fund, which has transferred over $100 million on-chain, existing simultaneously across multiple blockchains, enabling it to interoperate with digital custody systems. Alternatively, there is Franklin Templeton's Benji platform, whose tokenized money market fund is distributed across multiple blockchains, allowing its investors to use stablecoins for peer-to-peer share transfers, gaining intra-day returns accurate to the second, and accessing the liquidity of the tokenized money market. Meanwhile, BlackRock's tokenized institutional money market fund has exceeded $2.5 billion in assets under management one year after its launch.

These products bring improvements not just in terms of operations; they allow for fractional ownership, secondary market liquidity, and provide an extremely convenient way for investors who want to access these products without taking on the commitments of traditional limited partnership structures.

The most forward-looking companies are going even further: creating entirely new on-chain products. Take the on-chain yield vault as an example, which is a relatively new concept in the cryptocurrency space; it functions like a self-executing investment strategy.

Companies like Veda Labs are at the forefront of launching smart contracts that can stake tokenized assets, sell covered call options, provide loans to protocols, or arbitrage in DeFi, enabling institutions like asset management firms to offer white-label, branded investment strategies that can be executed automatically while embedding compliance and fee logic directly into the protocol. There is no need for spreadsheets or intermediaries; just build composable, auditable investment products for digitally native configurators. No reliance on opaque net asset value calculations; returns can be verified on-chain.

In short: this is a brand new category of investment products. It is more transparent than exchange-traded funds (ETFs), more automated than hedge funds, and more programmable than any traditional investment tools.

Now is the time for construction

Asset management companies do not need to give up their strengths, but they do need to innovate their service methods and content.

Blockchain is not a threat to private markets, but rather an upgrade that private markets have long awaited. It can simplify the complexity of backend operations, reduce operational risks, and provide customers with faster, smarter, and more efficient products.

The tools are ready, and the infrastructure is online. Pioneers have demonstrated limitless possibilities. Asset managers who ignore this innovation will face the risk of being eliminated by the times—because while other asset managers are still sending fund allocation requests via email, the next generation of investment platforms is already being built: blockchain-based, real-time, and large-scale.