Tokenized fund AUM to grow from $40bn to $317bn by 2028, led by private equity – PwC

November 19, 2024 (Preqin News) – Disruptive technologies are changing investment offerings, capabilities, and interests at asset and wealth management firms (AWMs) and for institutional and retail investors.

Generative AI, distributed ledger technology, and big data services are among disruptive tech offerings that are growing operational capabilities and revenues at AWMs and institutional investors, according to professional services firm PwC’s Asset and Wealth Management Survey. The biggest gains were in operational efficiency, cited by 84% of respondents, with revenue growth (80%), employee productivity (72%), and product innovation (70%) also seen as key areas that benefit from new technologies.

On the flip side, respondents said that disruptive technologies rarely improve advisor capacity to service investors (39%) and customer satisfaction (37%).

Market players are therefore looking for consolidation and partnerships to build tech-driven ecosystems and ‘transform their service offerings ahead of a great wealth transfer that will see mass affluents and younger audiences play a greater role in shaping service demands,’ said Albertha Charles, Global Asset & Wealth Management Leader, PwC UK.

The democratization of private markets has been a growing trend over the last two decades but has accelerated dramatically over the past few years. Fund managers are increasingly offering broader and more liquid investment options to new sources of capital, including retail investors and the ‘mass affluent’, who will be at the heart of a $68tn intergenerational wealth transfer over the next decade.

A new generation of tokenized products would allow AWMs to diversify their portfolio and fund offerings and tap a new generation of ‘tech-savvy’ clients. Fractional offerings could lower minimum investments and allow illiquid assets to be traded on the secondary market, the report said. PwC predicted that tokenized AUM would grow at a compound annual growth rate of 51.5% over the next five years, from $40bn in 2023 to $317bn by 2028.

Most institutional investors (54%) are looking to hold private equity tokenized assets in the next two to three years. This is followed by public equity (49%), money market (40%), and infrastructure tokenization (39%).

To meet this investor demand, AWMs are planning to offer tokenized products for private equity (53%), public equity (46%), and hedge funds (44%).

Since the US election earlier this month, crypto assets have surged in value, with bitcoin topping $90,000, up 32% since November 5, and over 100% since the start of the year. President-elect Trump’s proposed support for digital assets would lead to a less restrictive regulatory regime, according to an article from Reuters.

Across the blockchain, cryptocurrencies are the hottest in-demand digital asset offering, with 57% of AWMS saying that these products have shown the highest demand from investors. Looking forward, most institutional investors (62%) expect cryptocurrencies will have the highest demand over the next two to three years. Currently, 18% of AWMs have digital asset offerings including tokenization, cryptocurrencies, and NFTs.

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}