Managers Warm Up to US Tokenized Private Funds After Overseas Gains
January 22, 2025
Proponents of tokenizing alts funds are closely watching the U.S. legislative and regulatory landscape this year for changes that encourage new product development activity, more advanced structures and wider investor adoption. And more alternative fund managers are taking initial steps to create private and registered products that use blockchain technology, market watchers say.
…Another potential spark is hope that an SEC led by Trump nominee Paul Atkins will take steps to embrace tokenized products more openly, said Michael Pedroni, CEO at Highland Global Advisors, a strategic consultancy for financial services firms.
“The expectation is that he’s going to be much more open and innovative than his predecessor on this topic if he’s confirmed,” he said.
…”The real change needed in the U.S. isn’t regulation as much as the perception that legislation will be initiated, if not passed,” he said.
And ongoing efforts to expand alts into the advisor market also could spur new advancement, Pedroni said.
“The big prize is the retail or high-net-worth sector,” he said. “Tokenization is part of that story.”
While the development of tokenized alts offerings stalled in recent years in the U.S., other markets took initial steps to allow digital asset fund structures – with some of those efforts resulting in the rollout of new products.
Europe and Asia generally saw movement, with countries such as the U.K. and Singapore taking the lead, Pedroni said.
…And it’s clear that fund managers will have to actively participate in future discussions about regulatory and legislative advancements, Pedroni said.
“Any manager trying to do this properly needs to think not only about the business case,” he said. “They need to be talking to the SEC, to the Treasury Department, maybe even the Federal Reserve.”