Increasing numbers of institutional investors and wealth managers expect growth in tokenisation, with its ability to facilitate liquidity being seen as the most attractive benefit, according to a new research by digital assets hedge fund manager Nickel Digital Asset Management.

The study of organisations invested in the sector found that by ahead of secondary market trading options distribution and regulation are seen as the biggest barriers to adoption of tokenization by professional investors

Increasing numbers of institutional investors and wealth managers are predicting growth in tokenization as more become aware of the benefits, according to new global research (1) by London-based Nickel Digital Asset Management (Nickel), Europe’s leading digital assets hedge fund manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan.

The study with organisations invested in the sector found that 87% believe fund managers will increasingly look at the potential to tokenise investment funds and asset classes over the next three years. That compares to 75% who predicted more fund managers would explore tokenisation when the study was last conducted just over six months ago.

Nickel believes growing support for the expansion of tokenisation is being driven by rising awareness of the benefits it potentially offers.

Its research with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around $1.1tn in assets shows the role of tokenisation in facilitating liquidity and offering secondary marketing trading options were rated the top two benefits, ahead of greater transparency and enabling fractional ownership of assets. Reduced settlement times and enhanced risk management were rated as the fifth and sixth most attractive benefits, while reduced cost was ranked seventh.

The study however shows there are still challenges to be addressed before tokenisation is more widely adopted – with around 74% of respondents highlighting to distribution issues, and 73% expressing concerns about regulation.

Around 61% say widespread adoption of tokenisation will run up against investors’ reluctance to change, while 59% identified the maturity of service providers as a challenge, and 55% the current lack of tokenised assets. Less than half (49%) are concerned about the security risk of tokenisation and only 45% say lack of demand is a challenge.