Legal & General's $1.5 trillion asset management arm mulls fund tokenization
Legal & General Investment Management is exploring ways to tokenize its funds using blockchain technology, following global asset managers like BlackRock and Franklin Templeton.“Fund tokenization has great potential to revolutionize how our industry operates,” LGIM previously stated.
Legal & General, a leading UK-based financial services company specializing in insurance, pensions and asset management, is actively exploring ways to tokenize its funds using blockchain technology.
The company’s investment arm, Legal & General Investment Management, is one of the largest in the world, boasting £1.14 trillion ($1.5 trillion) in assets under management. It could now be set to follow in the footsteps of global giants like BlackRock and Franklin Templeton into the emerging real-world asset tokenization niche.
“We are evaluating ways to make the LGIM Liquidity funds available in tokenized format,” LGIM global head of trading Ed Wicks told The Block via email. “Digitization of the funds industry is key to improving efficiency, reducing cost and making a broad range of investment solutions available to a wider range of investors. We look forward to continued progress in this space.”
LGIM's liquidity funds are designed for short-term and ultra-short-term cash management, supporting operational cash needs while aiming for stable returns.
UK investment funds were given the green light for tokenization by a government working group in November 2023 in collaboration with the UK Treasury, financial regulator the Financial Conduct Authority and investment managers like BlackRock.
The model allows FCA-authorized funds to adopt tokenization for sales and redemption transactions, provided they meet specific criteria, such as investment portfolios only comprising mainstream investment assets and maintaining conventional valuation and settlement processes.
“Fund tokenization has great potential to revolutionize how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios,” Michelle Scrimgeour, Chair of the Working Group and LGIM's outgoing CEO, said at the time. “It is vital the UK remains at the forefront of technological development.”
However, the company had nothing further to add at this point, an LGIM spokesperson said. CoinDesk initially reported the development.
It’s not the first foray into crypto technology for Legal & General, having previously partnered with Amazon Web Services’ blockchain platform in 2019 for annuity transactions, which take place when a company takes over their clients' existing benefit or final salary pension schemes.
The growing market for tokenized funds
Franklin Templeton’s OnChain U.S. Government Money Fund (FOBXX) was the first U.S.-registered fund to use a public blockchain to process transactions and record share ownership, introduced in 2021. Initially launched on the Stellar blockchain, the fund later expanded to Polygon , Arbitrum , Avalanche and Aptos .
Total assets under management in tokenized securities have subsequently risen to become a $2.3 billion market, according to data compiled by asset management firm 21.co, the parent company of bitcoin exchange-traded fund provider 21Shares.
BlackRock’s BUIDL product currently leads the niche with $551 million in assets under management, equivalent to around 24% market share per 21.co’s data. Last week, it was reported the asset manager had pitched crypto exchanges Binance, OKX and Deribit on using its BUIDL token for derivatives trading.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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