In September we reported that Metzler Asset Management issued the first German tokenized fund shares. Last week it announced that Union Investment, one of Germany’s largest asset managers (AUM €424 billion), bought some tokenized fund units in another fund.
Metzler is running a three month pilot. Hence, it issued the September fund units to Bankhaus Metzler, but that fund was not publicly investable. However, in mid-October Union Investment acquired crypto fund units relating to a separate fund and incorporated them into its own multi-asset fund “PrivatFonds: Flexibel pro”.
In this case the fund shares are registered on the public Polygon blockchain. However, it’s not Union’s first Polygon experience as it was an investor in the Siemens bond earlier this year. It was also a major investor in most of the European Investment Bank’s (EIB) digital bond issuances.
DZ Bank also participated as Union’s primary custodian, as did Attrax Financial Services, the fund administrator which is a subsidiary of Union Investment.
The fund issuances used the new German legislation for so-called Crypto Fund Units (KryptoFAV) that applies to “common” investment funds that don’t use a corporate structure. It uses the same rules as for Crypto securities under Germany’s eWpG legislation.
“After successfully carrying out transactions in crypto bonds and implementing our smart derivative contracts project in recent years, building up our expertise in tokenized fund shares is another important component of our strategy around the token economy and digital assets” said Jochen Kerler, responsible for alternative investments in the mutual fund sector at Union Investment.
“Blockchain technology has the potential to make transactions faster and more cost-effective for our customers and to enable new product offerings in the future.”
Asset managers and DLT
So far the asset management sector has mainly focused on tokenizing fund shares. This could potentially cut costs in the fund distribution process and enable asset managers to understand more about their end investors.
Calastone proposes a more radical approach. The Carlyle-owned fund distributor wants to see the underlying assets tokenized, enabling far greater personalization of funds. Schroders is experimenting with Calastone as part of trials in Singapore.
