The tokenization of actively managed funds

Written by Terence Norman at The Blue Tractor Group LLC

Tokenization is growing in popularity by the day as we see more and more asset management firms tokenizing their funds and technical issues being consistently overcome. However, there is one particular group, i.e. Active Portfolio Manager’s - a group which can come in many forms, e.g. exchange traded funds (“ETFs”) and hedge funds, etc, which may be more reluctant than most to have their funds tokenized. After all, what discerning active portfolio manager wants to reveal its intellectual property, i.e. its investment and trading strategy, and expose its shareholders to the vagaries of predatory ‘front running’ and ‘copycat’ funds? These vagaries only possible because it was thought that the exact composition of a portfolio was required, on a daily basis, for accurate pricing and hedging by the market making community. However, the idea that having to know the exact underlying portfolio composition, for accurate pricing and hedging, is clearly nothing more than ‘lazy market making.’

To…