Boston Consulting Group (BCG) has recently published a whitepaper in collaboration with Aptos Ascend and Invesco, predicting that the tokenization of mutual funds could enhance annual investment returns by $100 billion. This projection hinges on the premise that all mutual funds will adopt tokenization. If this occurs, BCG estimates that by 2030, tokenized funds could reach a market size of $600 billion, reflecting a growth trajectory similar to that of exchange-traded funds (ETFs).
In its earlier 2022 analysis, BCG forecasted that the market for tokenized real-world assets (RWA) would expand to $16 trillion by 2030. The new estimate for tokenized funds exceeds the earlier projection by $200 billion, highlighting a growing recognition of the potential within this sector.
The whitepaper delineates the market potential between current crypto investors and traditional investors. Current crypto investors alone represent a demand potential of up to $290 billion for tokenized funds. However, the more substantial demand, projected to be in the trillions, is anticipated to come from traditional financial institutions.
BCG’s findings on the $100 billion uplift are attributed to several key factors. Half of this increase is expected to stem from the advantages of instant settlement, which would free up trapped capital. Additionally, approximately $33 billion is anticipated to come from increased efficiencies, leading to reduced fees that are more comparable to those of ETFs. Moreover, the ability to lend collateral more efficiently as a result of instant settlement could yield an extra $12 billion in interest income.
In addition to the $100 billion estimate, BCG identifies another potential revenue stream for sophisticated investors through the capture of intraday net asset value (NAV) fluctuations, which could represent an opportunistic gain ranging from $80 billion to $400 billion annually.
Exploring Tokenization in Alternative Funds
Last year, Bain & Co and JP Morgan delved into the prospects of tokenizing alternative funds. If high-net-worth individuals (HNWIs) increase their investments in alternatives, this could lead to an influx of up to $12 trillion into the sector, generating $400 billion in revenue. Asset managers are projected to secure the largest share at $270 billion, while wealth managers and trading platforms could garner $100 billion and $30 billion, respectively.
Overall, BCG’s latest insights underscore the transformative potential of tokenization within the financial landscape, particularly in enhancing returns and expanding market opportunities for mutual funds and alternative investments.
Related topics: