The Investment Association (IA) claims that the funds industry is approaching a major technology transformation driven by tokenisation and use of digital native assets in the fund products of the future.
The UK trade association for the asset management industry has made these claims in a new report, published to coincide with its annual conference, in which it lays down its vision for the future development of funds markets.
This projection, which it calls “Investment Fund 3.0”, builds on technological innovation, a forward-looking regulatory environment and better engagement with consumers.
At the centre of these plans for Investment Fund 3.0 sits the growth of tokenisation, which it expects to lower costs and improve efficiency in fund delivery by facilitating faster settlement and greater transparency across the transaction lifecycle.
The IA has advised that the government and Financial Conduct Authority should establish a taskforce to tap into potential benefits of decentralised finance and to create a framework for tokenised funds to operate in the UK.
The report, Investing for the Future: Three Potential Paths for a Tech-powered UK Fund Industry, also predicts a key role in this vision for native digital assets in fund products. This will be contingent on the introduction of supportive new regulation, with the IA proposing that regulated routes need to be created to provide digital native asset exposure.
Policy makers and financial supervisors must also assess the potential suitability of cryptoasset holdings within UCITS and domestic funds as part of a well-diversified portfolio.
The Association proposes that, for consumers, the future fund environment will offer more engagement and opportunities for customisation, while ensuring that essential consumer protection remains in place.
This may include steps to address the current advice gap in the UK and measures to roll out “the next generation” of digital information provision and disclosure — for example, through developments in Key Investor Information Document (KIID) delivery and through advances in electronic reporting.
Commenting on these proposals, IA CEO Chris Cummings says: “The investment management industry has a vital role in helping people for their futures into old age.
“With the ever-quickening pace of technological change, the investment management industry, regulator and policy makers must work together to drive forward innovation without delay.”
“Greater innovation will not only boost the overall competitiveness of the UK funds industry, but will improve the cost, efficiency and quality of the investment experience.”
