Legal & General Investment Management (LGIM) is considering tokenization as it looks for innovative ways to revolutionize financial services and foster accessibility for a broader user base.
Recently, Legal & General Investment Management's Global Chief Operating Officer Ed Wicks revealed the firm's interest in the emerging market for tokenizing real-world assets (RWA).
In an email to The Block, Wicks stressed that his company, which is one of the world's leading asset managers with $1,5 trillion in assets under management, is exploring the potential of tokenization to transform financial services. The aim through new technologies is to foster greater efficiency in transactions and broader access to investment products.
Following these statements, Legal & General is positioning itself to follow in the footsteps of other giants in the financial industry, such as BlackRock and Franklin Templeton, which have already begun to adopt this innovative technology in their services and business models.
The search for efficiency and expanding access to services
According to Wicks, Legal & General is considering tokenizing several of its funds, a strategy that could revolutionize the way the firm operates in the financial sector. By digitizing its assets, Legal & General seeks to improve operational efficiency, reduce costs and facilitate access to a wide range of investment solutions. In this context, tokenization allows assets to be digitally represented on a blockchain, simplifying processes such as the purchase, sale and settlement of funds.
“We are evaluating ways to make LGIM liquidity pools available in a tokenized format”, said Wicks a The Block.
On the other hand, Legal & General is showing interest in tokenization to attract a new group of investors, including those looking for more accessible and personalized investment options. According to Wicks, through this innovation, the firm could offer products that are better suited to the specific needs of investors, which in turn could increase market liquidity and improve risk management.
Wicks also indicated that Legal & General is evaluating ways to make its liquidity pools available in a tokenized format, representing an important step towards modernizing its product offering.
Legal & General's foray into the blockchain industry
It is worth remembering that the firm's foray into the blockchain industry is not new. In 2019, Legal & General had already collaborated with Amazon Web Services to implement blockchain technology. This in order to integrate the potential of blockchain transactions into the management of pension plan annuities.
This use case for blockchain technology has provided the firm with a solid foundation to further explore the technology, this time targeting asset tokenisation. Legal & General has recognised that digitisation of the fund industry is key to improving efficiency and offering more diverse investment solutions.
Growth in the tokenized asset market
The tokenized asset market has seen remarkable growth in recent years. According to data from 21Shares, the total value of assets under management in tokenized securities has reached $2.300 billion. This figure highlights the growing interest in tokenization as a viable and attractive form of investment.
For example, Franklin Templeton, one of the pioneers in the traditional financial world in using blockchain technology for fund tokenization, digitized its OnChain US Government Money Fund in 2021. With this fund, Franklin Templeton has demonstrated that tokenization can be used to process transactions and record share ownership efficiently. On the other hand, BlackRock, the world’s largest asset manager, has developed its BUIDL product, which leads the market for tokenized assets with over $550 million in assets under management to date.
In short, the growing competition in this space indicates that tokenization is not just a passing trend, but a significant evolution in the way assets are managed and transacted. Legal & General, by considering the tokenization of its funds, joins this wave of innovation that seeks to improve efficiency and accessibility in the financial sector.
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