Tokenized Funds: The Next Evolution in Asset Management

The asset management industry is undergoing a major transformation, and it’s happening on-chain. After mutual funds and ETFs revolutionized investing in the 20th century, tokenized funds are emerging as the “third evolution” in how we manage, access, and grow wealth.

Powered by blockchain, digital investment funds are reshaping the way capital is pooled and distributed, offering efficiency, transparency, and accessibility like never before.

In this article, we’ll break down what tokenized funds are, how they work, and why they’re quickly becoming one of the most promising innovations in modern finance.

What Are Tokenized Funds?

Tokenized funds are traditional investment funds such as mutual funds, hedge funds, or ETFs represented by digital tokens on a blockchain.

Each token represents a share or unit of the underlying fund and entitles the holder to benefits like profits, dividends, or redemption rights. These tokens are governed by smart contracts and can be programmed for compliance, distribution, and trading.

In simple terms: A tokenized mutual fund works just like a traditional mutual fund, but the ownership and transactions are handled via blockchain instead of legacy infrastructure.

Types of Tokenized Investment Funds

Here are the most common forms of tokenized funds:

• Tokenized Mutual Funds: Traditional mutual funds issued as blockchain-based tokens. Investors can buy, sell, or redeem fund shares directly via a digital wallet.

• Tokenized ETFs: Exchange-Traded Funds issued as digital securities, allowing for 24/7 trading and automated compliance.

• Private Tokenized Funds: Venture capital, private equity, or hedge funds that tokenize ownership to improve liquidity, transparency, and access for qualified investors.

How Fund Tokenization Works

The process of fund tokenization typically involves:

1. Fund Structuring: A traditional or new investment fund is legally structured and registered in accordance with regulatory requirements.

2. Token Creation: Digital tokens are issued to represent fund shares. These may be issued on public or private blockchains (e.g., Ethereum, Polygon, or ONINO).

3. Investor Onboarding: Investors go through KYC/AML verification before purchasing tokens. This can be automated via smart contracts.

4. Trading and Management: Investors can hold, transfer, or trade fund tokens in a secure and compliant way. Smart contracts handle profit distributions, buybacks, and voting.

5. Redemption or Exit: Investors can redeem tokens for underlying fund assets or proceeds programmatically or manually, depending on fund design.

Advantages of Tokenized Funds

Tokenized investment funds combine the regulatory familiarity of traditional funds with the efficiency and innovation of blockchain.

Here’s what sets them apart:

✅ 24/7 Trading

Unlike traditional funds, which rely on banking hours and custodians, tokenized funds can be traded around the clock, even on weekends.

✅ Fractional Fund Ownership

With tokenization, minimum investment thresholds can drop significantly, allowing for fractional ownership. Investors can buy $100 worth of a fund instead of needing $100,000.

✅ Automated Compliance

Smart contracts can enforce whitelisting, jurisdictional rules, and investor restrictions programmatically, reducing legal risk and administrative burden.

✅ Global Accessibility

Tokenized funds can be accessed worldwide (subject to regulation), unlocking new markets and broadening investor reach.

✅ Real-Time Transparency

Blockchain allows investors to verify fund data and audit holdings in real time, something that’s typically opaque in traditional funds.

Real-World Examples

🎯 Franklin Templeton

One of the largest U.S. asset managers, Franklin Templeton, issued a tokenized money market fund on public blockchains like Stellar and Polygon, showing that institutional players are embracing this technology.

🎯 Switzerland's Tokenized Fund Platform

Swiss firms like Sygnum, Taurus, and Aktionariat offer full-stack solutions for issuing and managing tokenized mutual funds and private equity vehicles under Swiss regulatory frameworks.

🎯 BlackRock’s Entry

BlackRock, the world’s largest asset manager, has invested in blockchain infrastructure and is exploring tokenized ETFs and digital fund rails.

Use Cases for Businesses and Investors

Wealth Managers: Create modern, programmable portfolios with lower costs
‍Private Equity Funds: Tokenize LP shares for better liquidity and fractional access
‍Retail Investors: Get access to institutional-grade funds at a lower entry point
‍Fintech Platforms: Offer on-chain fund distribution and wallet integration
‍Asset Managers: Reduce overhead, automate compliance, expand global reach

Regulatory Considerations

While tokenized funds offer powerful benefits, they are still subject to the same regulatory oversight as traditional funds. Depending on the jurisdiction, this may involve:

• Prospectus obligations
• Securities licensing
• Custody and depository rules
• KYC/AML and investor whitelisting
• Restrictions for retail vs. professional investors

That’s why choosing the right tokenization platform like ONINO can simplify regulatory compliance through embedded smart contracts, investor verification tools, and customizable governance modules.

The Future of Fund Tokenization

The tokenized fund market is expected to grow significantly over the next decade. Analysts estimate that 10–15% of all assets under management could be tokenized by 2030. equivalent to $10–15 trillion globally.

We expect to see:

• Integration of real-world asset portfolios (like real estate or credit)
• Launch of on-chain index funds and tokenized ESG funds
• Growing adoption by pension funds, banks, and sovereign wealth funds
• Regulatory sandboxes enabling faster time to market

Final Thoughts

Tokenized funds are more than a buzzword they’re a practical evolution in how we invest. By merging the stability of traditional finance with the power of blockchain, tokenized mutual funds and ETFs unlock new levels of efficiency, transparency, and inclusivity.

As infrastructure matures and regulation evolves, we’ll likely see tokenized funds become as common as ETFs are today.

Looking to launch a tokenized fund?

Book a demo with ONINO to explore how we can support your compliant, secure, and scalable fund tokenization strategy.

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