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August 6, 2025

How to Tokenize Investment Funds

Tokenizing investment funds transforms traditional LP shares into blockchain-based digital securities, enabling fractional ownership, automated compliance, and improved liquidity. This regulated model helps fund managers expand global reach and streamline operations while offering investors easier access and faster settlements.

How to Tokenize Investment Funds

Tokenizing investment funds using a blockchain tokenization platform is transforming how fund managers issue, manage, and distribute fund shares. By converting LP shares into digital securities on a blockchain, private equity, venture capital, and hedge funds can unlock liquidity, automate compliance, and access a broader investor base.

In this guide, you'll learn how to tokenize investment funds, the benefits of using a tokenization platform, and how it fits within today's regulatory and investor landscape.

What Is Investment Fund Tokenization?

Fund tokenization refers to issuing fund shares as digital tokens recorded on a blockchain. These tokens represent fractional ownership in the fund and:

  • Are governed by smart contracts.
  • Can automate distributions and compliance rules.
  • Maintain legal parity with traditional fund shares.

Tokenization does not bypass regulation. Instead, it wraps existing structures into a more efficient, programmable layer, often via a security token platform that enables compliant tokenization.

Why Tokenize Investment Funds?

Here’s how fund managers and investors benefit from using a tokenized asset issuance model:

For Fund Managers:

  • Wider access to capital via global investor reach.
  • Automated fund administration (e.g., compliance, payouts).
  • Efficient onboarding using smart contracts and digital ID.

For Investors:

  • Fractional ownership allows smaller minimum investments.
  • Faster settlement and 24/7 access to fund shares.
  • Improved liquidity through secondary trading options.

Step-by-Step: How to Tokenize an Investment Fund

1. Legal and Regulatory Setup

  • Decide whether to tokenize fund shares directly or use a tokenized SPV.
  • Ensure legal recognition of tokens (e.g., under MiFID II, eWpG in Germany).
  • Use private placements or regulated exemptions to launch a compliant crypto investing process.

2. Choose a Tokenization Platform

Select a licensed, all-in-one asset tokenization platform like ONINO to handle:

  • Smart contract deployment.
  • KYC/AML and investor onboarding.
  • Custody and compliance integrations.

Look for support for EVM-compatible blockchains and flexible deployment tools like a tokenization SDK.

3. Mint and Issue Fund Tokens

  • Tokens represent LP shares or fund units.
  • Issued on-chain and linked to legal documentation.
  • Metadata can encode investor rights, whitelisting, and NAV rules.

4. Primary Fundraising (STO)

  • Launch a primary token offering platform with full KYC/AML checks.
  • Accept fiat and crypto for subscriptions.
  • Distribute tokens securely to verified investor wallets.

5. Enable Secondary Trading

After the primary sale:

  • Allow peer-to-peer trading or list on licensed ATS platforms.
  • Integrate transfer restrictions into smart contracts.
  • Monitor ownership and regulatory caps (e.g., investor limits).

6. Ongoing Fund Management

  • Automate dividend distributions and governance via tokens.
  • Maintain NAV reporting and compliance monitoring.
  • Keep investors informed through tokenized dashboards.

Real-World Examples of Tokenized Funds

  • Hamilton Lane: Offered tokenized PE access via Securitize.
  • Franklin Templeton: Launched a money market fund on Stellar and Polygon.
  • BlackRock BUIDL: Tokenized bond fund managing billions in assets.
  • Metzler Asset Management: Piloted a regulated fund in Germany under eWpG.

These examples validate tokenization as a scalable, regulated path for modern fund issuance.

Challenges and Key Considerations

  • Legal Complexity: Tokenized funds must follow traditional securities laws.
  • Custody & Security: Choose trusted providers and audited smart contracts.
  • Market Infrastructure: Liquidity is still maturing in secondary markets.
  • Investor Readiness: Platforms should abstract away wallet complexity.

Conclusion

Tokenization enables funds to operate faster, cheaper, and more transparently while complying with regulation. Whether you’re a private equity manager or a hedge fund seeking to scale, a tokenized investment platform can help you:

  • Expand global access.
  • Simplify compliance.
  • Offer better investor experiences.

With the right security token platform, legal setup, and tech partner, tokenizing your fund is no longer a futuristic idea, it’s a competitive edge today.

Want to learn how ONINO can help you launch your tokenized fund? Book a free demo today.

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