Key Takeaways
- • EY-Parthenon surveys of 251 accredited/high-net-worth (HNW) investors and 78 institutional asset owners in the United States show investors plan to allocate 7% to 9% of their full portfolios to tokenized assets by 2027.
- • Institutional investors project allocations of 5.6% of portfolios to tokenized assets by 2026, while HNW investors anticipate 8.6%.
- • Regulatory uncertainty is the primary perceived obstacle, cited by 49% of institutional and 24% of HNW investors.
- • Tokenized private equity and real estate are the most sought-after alternatives, with 86% of institutional and 62% of HNW investors ranking tokenized alternatives as their first asset of choice.
- • Both investor groups prefer accessing tokenized assets through traditional intermediaries, with 77% of institutions and 80% of HNW investors favoring traditional financial institutions over FinTech or digital-native players.
Summary
EY-Parthenon has published survey findings indicating substantial and growing investor interest in tokenization, the process of using blockchain technology to convert an asset or its ownership rights into digital form. According to the survey, investors indicate they may allocate 7% to 9% of their entire portfolios to tokenized assets by 2027. Seventeen percent of respondents already invest in tokenized assets, 25% plan to invest, and 35% want to learn more. Some 55% of surveyed investors plan to allocate to tokenized assets within one to two years, citing increased liquidity, lower transaction costs, improved performance and enhanced transparency as motivations.
The survey covered 251 accredited or HNW investors with more than $1 million in investable assets and 78 institutional asset owners, including endowments, pension funds, foundations, family offices, insurance general accounts and sovereign wealth funds, with AUM ranging from more than $500 million to less than $50 billion. Institutional investors project allocations of 5.6% of portfolios to tokenized assets by 2026, against 8.6% for HNW investors.
Regulatory uncertainty was the leading perceived obstacle, selected by 49% of institutions and 24% of HNW investors. The second-largest concern was a lack of trusted players in the market, cited by 12% of institutions and 24% of HNW investors. Both groups prefer accessing tokenized assets through traditional intermediaries such as brokers/dealers, exchanges and wealth managers.
Alternative assets are the focus of strong demand. Some 62% of HNW and 86% of institutional investors ranked tokenized alternatives first compared with equities, fixed income, cash and money market funds. Private equity and real estate lead within that category. Among HNW investors with less than $10 million in investable assets, only 38% felt they had adequate access to alternatives, versus 58% of those with more than $10 million. Sixty-five percent of HNW and 32% of institutional investors intend to allocate to tokenized real estate by the end of 2024. A majority of institutions (63%) would consider direct real estate investments without voting power if it lowered investment minimums.
Fixed income demand is also rising. Sixty-four percent of HNW and 33% of institutional investors plan to invest in tokenized bonds by end-2024, rising to 91% and 83%, respectively, by 2026. Roughly 80% of institutions and 83% of HNW investors seek a yield premium of about 5 to 10 basis points over traditional bonds, which the survey attributes to expectations that operational savings will be passed on to investors.
The survey concludes that asset managers should build or partner for tokenization capabilities, pilot offerings in private equity and real estate, and weigh pricing strategies that may support premium fees with HNW investors while institutions expect lower fees than on traditionally issued assets.
The survey covered 251 accredited or HNW investors with more than $1 million in investable assets and 78 institutional asset owners, including endowments, pension funds, foundations, family offices, insurance general accounts and sovereign wealth funds, with AUM ranging from more than $500 million to less than $50 billion. Institutional investors project allocations of 5.6% of portfolios to tokenized assets by 2026, against 8.6% for HNW investors.
Regulatory uncertainty was the leading perceived obstacle, selected by 49% of institutions and 24% of HNW investors. The second-largest concern was a lack of trusted players in the market, cited by 12% of institutions and 24% of HNW investors. Both groups prefer accessing tokenized assets through traditional intermediaries such as brokers/dealers, exchanges and wealth managers.
Alternative assets are the focus of strong demand. Some 62% of HNW and 86% of institutional investors ranked tokenized alternatives first compared with equities, fixed income, cash and money market funds. Private equity and real estate lead within that category. Among HNW investors with less than $10 million in investable assets, only 38% felt they had adequate access to alternatives, versus 58% of those with more than $10 million. Sixty-five percent of HNW and 32% of institutional investors intend to allocate to tokenized real estate by the end of 2024. A majority of institutions (63%) would consider direct real estate investments without voting power if it lowered investment minimums.
Fixed income demand is also rising. Sixty-four percent of HNW and 33% of institutional investors plan to invest in tokenized bonds by end-2024, rising to 91% and 83%, respectively, by 2026. Roughly 80% of institutions and 83% of HNW investors seek a yield premium of about 5 to 10 basis points over traditional bonds, which the survey attributes to expectations that operational savings will be passed on to investors.
The survey concludes that asset managers should build or partner for tokenization capabilities, pilot offerings in private equity and real estate, and weigh pricing strategies that may support premium fees with HNW investors while institutions expect lower fees than on traditionally issued assets.
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