Tokenization of Investment Funds 101 for Investment Executives

Portfolio managers, asset managers, wealth managers, hedge funds, and every entity in financial investments, gather round! 

You might be getting left behind if you’re not looking into the tokenization of investment funds. 

Here’s why I say that: 

The global asset tokenization market size is currently estimated at USD 2.08 trillion as of 2025. Projections even show that it could soar to over USD 13.5 trillion by 2030. 

Still asking what tokenized investment is about? 

This article is for you. 

In this guide, we break down what tokenized investment funds are, what you stand to benefit from them, how to create tokenized investments, and some notable examples you can model your tokenized fund after. 

Let’s get started! 

TL;DR:

• Tokenized investment funds are simply decentralized, digital versions of share ownership.
  
  
• Tokenization provides lower investment thresholds, 24/7 investment access, lower operational costs, fractional ownership, and revenue growth
  
  
• Blackrock, Hamilton Lane, Hong Kong Monetary Authority, and Diamond Standard are some notable institutions with successful investment tokenization projects. 
  
  
• You can tokenize your investment funds by selecting the right asset, evaluating its value, developing the smart contracts, choosing a blockchain platform, building the client-facing app, and launching to the secondary market. 

What is a Tokenized Investment Fund? 

A tokenized investment fund is a traditional investment fund whose shares or units have been represented as digital tokens on a blockchain network. Instead of representing each investor’s ownership quota as shares or units, as in a traditional investment fund, fractional ownership is depicted as token ownership. 

Furthermore, owning shares in an investment fund qualifies the owner for some benefits like voting rights or dividend claims. The same thing applies to owning tokenized investment funds. 

So, what’s the difference? 

Tokenized investment funds are simply decentralized, digital versions of share ownership. 

Unlike shares, they do not need traditional stock exchanges or brokers to function. Basically, anyone with enough funds can buy or sell a piece 24/7 without the assistance of an intermediary. 

Wondering what types of funds can be tokenized specifically? 

While this concept is still in its infancy, it applies to all kinds of investment funds in theory. Some common examples that come to mind include:  

• Real Estate Funds 
  
  
• Variable Capital Companies (VCCs) 
  
  
• Private Equity Funds & Venture Capital Funds 
  
  
• Hedge Funds 
  
  
• Infrastructure Funds 
  
  
• Commodities Funds 
  
  
• Debt Funds 

Basically, each of these funds can be converted to digital tokens for individual members of the public to invest in. 

You may be thinking: “But traditional investment funds work just fine! So, why replace something that’s not broken?“

Let’s just say advancements in blockchain technology come with some benefits that are solutions to certain shortcomings of traditional financial systems that many people have now come to accept as the norm. 

In the next section, we talk about these benefits in more detail. 

What are the Benefits of Fund Tokenization? 

From investors and asset managers to investment firms and service providers, all parties in the investment market have something to gain from fund tokenization. The following are some of those benefits of fund tokenization 

1. 24/7 Secondary Transfers 

Investors can buy and sell tokenized investment funds at any time of the day or week. The blockchain’s decentralized and distributed nature means it operates continuously outside the confines of standard “work hours.” 

This attribute contrasts sharply with the nature of the traditional investment fund market, which is restricted to the working hours of traditional investment fund markets. These are often tied to the standard operating hours of the different markets in which the securities are being sold. For instance, the New York Stock Exchange (NYSE) operates between 9:30 AM and 4:00 PM (ET).

2. Lower Investment Thresholds

Units of tokenized securities are generally less expensive to obtain than sizable shares in investment funds. This low minimum investment amount, coupled with 24/7 availability, significantly reduces the investment barriers for both institutional and individual investors. As such, major investment funds like private equities and venture capital funds that were once only accessible to high net worth (HNW) individuals and institutions now have a lower investment barrier. 

3. Fractionalization

By extension, lower investment thresholds encourage the ownership of smaller and more manageable investment units. Consequently, more entities can get at least some slices of the investment fund pie. And if you think about it, that promotes decentralization, which is kind of the whole point of moving away from centralized financial infrastructures. 

4. Instant Collateralization 

Instant collaterization means that investors can gain quick access to financial collaterals for borrowing or lending. Share ownerships also serve this purpose. However, the reliance of traditional financial systems on intermediaries and rigorous standard processes makes the collateralization process lengthy and laborious. 

With share tokenization, secure blockchain records allow investors to borrow against their tokenized deposits quickly. They don’t even have to redeem them for cash, as the transactions are settled almost immediately. 

5. Lower Operational Costs ‘

Tokenized ETFs and investment funds cost less to manage for issuers (e.g., fund managers, financial institutions, etc.) and service providers. 

Do you know why that is the case? 

Blockchain technologies like smart contracts automate processes like compliance, record keeping, and settlement that are otherwise handled by distinct personnel and software in traditional investment funds. 

Therefore, there’s a potentially higher chance of higher net returns. Even investors can benefit from this in terms of lower trading fees. 

6. Revenue Growth

In addition to lower operating costs, issuers, service providers, and financial institutions stand to gain revenue growth from offering token as a fund services to the public. 

This is because they now have an untapped opportunity to offer new specialized services to their users or investors. For instance, they could offer token custodial services and charge users to help them secure their tokens after purchase. They could even take things a bit further if they tokenize trading fees and lean fully into digitalization. 

Investors are also not left out in terms of revenue growth opportunities. 

By capitalizing on intra-day price movements within the funds, they can generate more financial returns. Those sophisticated enough to develop profitable trading strategies have a lot of money here! 

Frankly, this revolutionary concept brings a lot to the financial investment sector. And it’s not just theoretical because some tokenization projects and investors are already reaping the benefits of token investments as we speak. 

Let’s glance through some notable examples in the following section. 

Tokenization of Funds Examples 

The following are some real-life examples of tokenized investment funds in 2025: 

1. The Blackrock USD Institutional Digital Liquidity Fund (BUIDL or The Fund)

With over $510,355,845 worth of assets under management (AUM), BUIDL is one of the most prominent examples of tokenized investment funds. It was launched in 2024 by Blackrock with the sole responsibility of producing current income as is consistent with the liquidity and stability of the principal. As of 2025, the Total Asset Value is north of USD 2 billion. 

2. Hamilton Lane Secondary VI (“The Fund” or “Fund VI”) 

This is one of the private equity secondary funds managed by Hamilton Lane, a private markets investment firm with over 24 years of funds management experience. Located in Philadelphia, Pennsylvania, the fund usually allows high net worth investments upwards of USD 55 – 60 million. 

However, it recently created an opening for individual investors with funds lesser than that by creating a tokenized feeder fund on the Polygon Blockchain via Securitize. Consequently, it closed with a whopping sum of $5.6 billion in investments in June 2024. That’s to tell you how much interest investors have in token investments. 

3. Project Ensemble Sandbox 

This project, launched by the Hong Kong Monetary Authority (HKMA), focuses on four major themes: fixed income and investment funds, liquidity management, green and sustainable finance, and trade and supply chain finance. As such, it is a major driver of the tokenized asset market in Hong Kong. 

4. Diamond Standard’s Commodity Fund 

In a bid to make diamonds an investable asset class for the average institution or individual globally, Diamond Standard has created a tokenized investment fund comprising four different investment products, all backed by physical natural diamonds. 

So, now it is clear that there are immense business opportunities in tokenizing different kinds of investment funds. 

But how does the average service provider or issuer go about it? 

Jump to the next section to get steal Debut Infotech’s tested and proven process. 

How to Create a Tokenized Fund  — Debut Infotech’s Fund Tokenization Process

This is a fund tokenization guide for any asset manager, traditional investment fund, mutual fund, investment fund, or any other kind of issuer in the financial markets looking to tokenize their investment fund.

1. Select and Evaluate the Asset

First things first: you need to select a valuable asset for tokenization. 

This is the first and arguably the most crucial step for success. While you want to get the “interesting” part of creating tokenized assets, you also need to make sure you’re tokenizing something valuable enough for investors to consider investing in. 

Therefore, you should do your due dilligence and make sure you document the entire process. 

2. Verify the Asset’s Ownership 

While this may sound cliche, you also need to confirm entities with the exact ownership claims to the asset you’re about to tokenize. 

This ownership verification process sets the tone for the project’s legal structuring as it ensures that the tokens actually represent a legitimate claim to units of the investment funds. 

You can then take things further by defining the specific rights the token ownership affords the owner. 

Do token owners get voting rights, access to dividends, or both? 

This is where you decide that. 

3. Ascertain the Asset’s Value and Create its Tokenomics 

Once we clarify things like this at Debut Infotech, we dive straight into creating a relationship between the asset’s value and the project’s tokenomics—basically, “the token’s lifecycle.” 

There are two major structures widely used for this purpose. These are

• Tokenized Special Purpose Vehicles (SPV): A scenario whereby the investment fund itself is held by a separate legal entity, which is then tokenized. As such, the entity’s ownership is tokenized and not the investment fund outright. In this case, token ownership represents indirect ownership of the underlying investment fund. 
  
  
• Direct Asset Tokenization: Here, the investment fund itself is outrightly tokenized, and tokens represent a direct claim on units of the investment fund. 

4. Develop the Smart Contracts 

Smart contracts development in this process helps to encode all the specifications we’ve been working on so far. 

These self-executing programs help represent ownership claims on the blockchain, define and enforce transaction rules on the network, automate dividend distribution, and even automate capital calls. 

5. Choose the Blockchain Platform for Tokenization 

Here’s where you decide which platform investors log on to purchase your investment fund token when it eventually launches. Your options include Ethereum, Stellar, Binance Smart Chain (BSC), Polkadot, Tezos, Algorand, etc. 

Your choice here should be determined by the type of asset you’re tokenizing, your target audience, security requirements, liquidity expectations, and, of course, cost! 

At this stage, the inputs of an experienced real world asset tokenization company like Debut Infotech Pvt Ltd can prove invaluable. 

6. Build the App to Manage the Tokenized Assets 

Once we sort out the perfect blockchain platform for hosting the tokenization project, you can start thinking about how the investors and public perceive your project. You could opt for either a web app or mobile app or both. 

Again, as expressed earlier, the best choice depends on your project’s peculiarities. However, you must remember that the intuitiveness and functionality of your client-facing interface determine, to a large extent, how investors perceive and trust your tokenization projects. 

7. Release the Token on the Secondary Markets 

The final step of the process is where investors interact with your platform and acquire your tokenized securities. 

Most tokenization projects make a huge public announcement calling for mass investments from the public. This process of raising funds via tokenized investment funds can be called a Security Token Offering (STO). 

That’s right! 

Similar to an Initial Public Offering (IPO), only this time, investors will be acquiring tokens of your investment fund instead of shares. 

Challenges and Regulatory Issues Every Business Leader Should be Aware Of 

The process of tokenizing investment funds sounds pretty simple and straightforward, right? 

It is! At least with the right guidance. 

However, the concept is still in its infancy, and many businesses have many unanswered questions about some intricate aspects. 

For instance, there are industry-wide questions about the regulatory licenses required to issue investment fund tokens and how to obtain these licenses. 

Furthermore, others question the necessary technological infrastructure and expertise required to build such a scalable project without glitches. 

In truth, these concerns are valid. However, at this point, the successes of major platforms like Blackrock, Diamond Capital, and the Hong Kong Monetary Authority with Project Ensemble are testaments to the possibilities of doing this successfully, especially with the assistance of end-to-end tokenization companies capable of handling the project from start to finish. 

The Takeaway: Tokenization is the Next Step for Investment Funds Focused on the Future

That’s what the statistics tell us. 

The days of traditional investment funds being open only to a few institutional investors and high-net-worth individuals are numbered. 

Blockchain technology is democratizing access in different industries, and finance is right on top of that list. The winners of today and the future are pooling funds — however large or small — from all investors willing to put some skin in the game, and it would just be unwise to turn away money. 

It’s still early days, though, so you need to be careful when launching tokenized investment funds. 

However, you can handle token development with ease at Debut Infotech Pvt Ltd.  

Frequently Asked Questions (FAQs)