While investor appetite for tokenised assets has been surging for some time, new research suggests that most institutional investors now favour it to access pre-IPO opportunities.
Given that it breaks down real-world assets into smaller, more affordable units, tokenisation - by leveraging blockchain technology - gives retail investors tickets to a dance previously reserved for institutional players or high-net-worth individuals due to high capital requirements.
For example, instead of requiring a single buyer to invest $10 million, the [asset] owner might issue 100,000 digital tokens, each representing $100 of the property.
Asset diversity
As well as satisfying growing demand for greater liquidity, lower costs, greater transparency and shorter settlement times, tokenised assets – aka fractional ownership – also allow retail investors to more easily diversify into asset classes previously off limits.
Virtually any valuable asset can be tokenised, and new research suggests that around 70% of institutional investors have expressed strong or moderate interest in taking it one step further: by using this new digital channel to gain access to pre-IPO opportunities.
By levelling the investor playing field, tokenisation means mum and dad investors get to share with institutional investors in exposure to high-profile companies like OpenAI and SpaceX before they IPO.
Pre-IPO companies
Asked if they would use tokenisation to access private shares of pre-IPO companies, 52% of respondents to a January survey of 351 institutional decision-makers had moderate interest in exploring partnerships or pilot allocations.
While 28% had mild interest in monitoring developments,17% registered strong interest and viewed tokenisation as an enabler of new investment opportunities.
According to the EY-Parthenon and Coinbase report, tokenisation is expected to begin meaningfully impacting trading, clearing, and settlement.
“Momentum is rising; asset manager interest in tokenising assets rose from 40% to 64% YoY, and investor interest in tokenised assets increased from 57% to 63%,” the report noted.
“Scaling will greatly depend on regulatory clarity, integration, and secondary liquidity.”
Uncertain regulatory environment
Meanwhile, the report flags that an uncertain regulatory environment is the primary concern when investing in digital assets (66%), and the most significant barrier to investing in tokenised assets (67%).
“The next phase of adoption will likely be shaped by scalable market structure, as in tokenization moving beyond pilots, stablecoins embedding into operating workflows, and rulemaking improving clarity across products and intermediaries,” the report said.
Interestingly, while U.S. regulations following the GENIUS Act are responsible for putting digital assets in the headlines, the next phase of digital assets is squarely focused on asset tokenisation.
Tapping tokenised assets
Here are suggested ways retail investors can benefit from tokenised assets:
1. Access to High-Value Real Estate
Tokenisation allows investors to buy fractions of luxury apartments, commercial buildings, or land.
- Rental Income & Appreciation: Token holders can receive a share of rental income and benefit from the appreciation in the property’s value.
- Lower Entry Barriers: Investors can participate in real estate with significantly lower capital requirements than purchasing a property outright.
2. Diversification into Alternative Assets
Investors can diversify portfolios beyond stocks and bonds by accessing "alternative" investments previously reserved for institutional or wealthy investors.
- Private Equity & Debt: Retail investors can gain exposure to private companies or venture capital funds.
- Collectibles & Art: Tokenised ownership of fine art, rare collectibles, and high-value items allows ownership of fractions of unique items.
- Infrastructure Projects: Investment in public works, such as toll roads or renewable energy projects, can provide regular income streams.
3. Increased Liquidity and Trading Flexibility
Tokenised assets can be traded on secondary markets 24/7, enabling faster, more efficient transactions compared to traditional, often illiquid markets.
- 24/7 Trading: Unlike traditional exchanges with fixed hours, tokenised assets allow investors to react to market changes instantly.
- Instant Settlement: Blockchain technology enables near-instantaneous (T+0) settlement, reducing the time capital is locked up compared to traditional T+2 cycles.
4. Yield Generation via Tokenised Treasury Funds
Retail investors can now purchase tokenised versions of U.S. government debt or money market funds.
- Stable Yields: Platforms like Ondo Finance and Franklin Templeton allow smaller buyers to invest in short-term U.S. Treasury bills, providing a safe, yield-bearing, on-chain asset.
- Collateral Usage: These tokens can be used as collateral in DeFi
- Lower Costs and Greater Transparency
- Reduced Fees: Automation through smart contracts removes intermediaries like brokers, agents, and registrars, reducing administrative fees.
- Transparent Ownership: Blockchain provides an immutable, transparent, and secure record of ownership, making it easier to verify assets and reducing the risk of fraud.
But while these opportunities are significant, retail investors should also remember that tokenised assets are still evolving.
The market still faces regulatory uncertainty, cybersecurity risks regarding private key theft, and potential lower liquidity in new, specialised markets.
