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.