$1.5 Trillion U.K. Pension Fund Eyes Entry into Crypto Tokenization

• Legal & General is entering the crypto tokenization space.

• The firm aims to make its investment management liquidity funds available in tokenized form.

Legal & General (L&G), a major UK-based pension and investment management firm, is considering entering the blockchain tokenization market. With $1.5 trillion in assets under management, the company is considering how it can package its Legal & General Investment Management (LGIM) liquidity funds in a tokenized manner. 

Tokenization is the process of transforming tangible assets such as property, natural resources such as oil and gas and even paintings into digital tokens. This makes it possible for the average investor to own and trade parts of what were once whole assets that were out of their reach. To achieve this goal, firms have introduced tokenized versions of assets like U.S. Treasuries-backed money market funds to increase efficiency, reduce costs, and increase accessibility to investors. 

Ed Wicks, global head of trading at LGIM, confirmed the firm’s interest in tokenization. “We are evaluating ways to make the Legal & General Investment Management Liquidity funds available in tokenized format,” Wicks stated via email.  He highlighted the importance of the digitization of the funds industry as a way of increasing efficiency, decreasing cost and widening the scope of investment to other investors.

It is not the first time L&G has shown interest in the blockchain technology. The company initially tested the technology in 2019 after deciding to leverage Amazon Web Services (AWS) managed blockchain service. It intended to oversee and document the bulk annuities for insurance operations. Using blockchain in internal operations shows that L&G is ready to embrace new technologies to transform its business. 

Global Asset Managers Lead in Tokenization Initiatives

Although the firm has not introduced any products tied to blockchain technology, it has recently engaged in the process of tokenizing its liquidity funds, which indicates that the firm is in the process of understanding the potential of blockchain technology in investment management. 

BlackRock, the largest asset manager in the world, has already launched its BUIDL fund on the Ethereum blockchain. Furthermore, Visa, the payment processing company, has also entered the tokenization industry with the introduction of its Visa Tokenized Asset Platform (VTAP). In July, Goldman Sachs said it would roll out three tokenized projects involving money market funds and real estate before the end of 2024. Other major firms that have come up with similar products include Franklin Templeton, State Street, and Abrdn.

A recent study by the consulting firm Boston Consulting Group and the World Economic Forum said that the market for tokenized assets could be worth $16tn by the end of the 2020s. In another assessment, it was forecast that the market could be worth between $3.5 trillion in a ‘bear case’ and up to $10 trillion in a ‘bull case’. Most firms predict that the RWA sector may reach a market size of between $4 trillion and $30 trillion.