Investment Union acquires tokenized shares of Metzler fund
In a groundbreaking move, Union Investment, a leading German asset manager with assets under management (AUM) of €424 billion, has entered the realm of tokenized fund shares. This transformative development promises to revolutionize the asset management sector by enhancing liquidity, transparency, and accessibility of funds through blockchain technology.
The first German tokenized fund shares were issued by Metzler Asset Management in September, with Union Investment serving as the fund administrator in the acquisitions. The trials for tokenizing underlying assets are being conducted by Schroders, while Calastone, a fund distributor, proposes a more radical approach of tokenizing these assets.
The fund issuances utilised the new German legislation for Crypto Fund Units (KryptoFAV), which applies to "common" investment funds that don't use a corporate structure. The location of these trials is Singapore. DZ Bank participated as Union's primary custodian in the fund acquisitions.
The tokenized fund shares are registered on the public Polygon blockchain. Metzler is running a three-month pilot, and the September fund units were issued to Bankhaus Metzler. Union Investment, in a separate transaction, bought tokenized fund units in a different fund.
Jochen Kerler, responsible for alternative investments in the mutual fund sector at Union Investment, emphasised that building up expertise in tokenized fund shares is another important component of Union Investment's strategy around the token economy and digital assets. 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".
The same rules as for Crypto securities under Germany's eWpG legislation were used for the fund issuances. It's worth noting that the September fund units were not publicly investable. Union Investment has been an active participant in the digital bond market, having invested in various issuances, including the European Investment Bank and Siemens earlier this year.
This development underscores a broader trend toward digital asset adoption in asset management, promising increased democratization, efficiency, and innovation in fund distribution and trading. However, it also necessitates robust legal and regulatory frameworks to ensure tokenized shares have clear legal standing and operate within Anti-Money Laundering (AML) and sanctions frameworks.
- Union Investment's acquisition of tokenized fund units in a separate fund indicates a focus on enhancing their expertise in blockchain technology and digital assets, specifically tokenized fund shares, as part of their strategy within the token economy.
- Schroders is currently conducting trials for tokenizing underlying assets, while Calastone proposes a more radical approach of tokenizing these assets, demonstrating the willingness of businesses to integrate technology in finance.
- The tokenized fund shares issued by Union Investment and Metzler are registered on the public Polygon blockchain, showcasing the potential of blockchain technology to improve transparency, liquidity, and accessibility in the asset management sector.
