Institutional investors are increasingly turning to tokenized assets as a key component of their portfolios, with a State Street study projecting that between 10% and 24% of institutional investments could be made through tokenized instruments by 2030. Private equity and private fixed income are expected to be the early adopters of tokenization, as these markets have historically struggled with illiquidity and high operational costs.
State Street’s President of Investment Services, Joerg Ambrosius, highlighted the significant role that emerging technologies like tokenization, artificial intelligence, and quantum computing are playing in reshaping the future of finance. He noted that institutional investors are moving beyond experimentation and are now leveraging digital assets as a strategic lever for growth, efficiency, and innovation.
While tokenization is gaining traction, the State Street study also revealed that many investors believe generative AI and quantum computing will have a more transformative impact on operations than blockchain. However, respondents still see blockchain as a valuable technology that can work in tandem with these other emerging technologies.
Currently, institutional portfolios hold an average of 7% in digital assets, a figure that is expected to more than double to 16% within three years. The most common forms of digital assets in portfolios include digital cash, tokenized equities, and tokenized fixed income instruments.
Asset managers are leading the way in adopting digital assets, with higher exposure to Bitcoin, Ethereum, and tokenized assets compared to asset owners. Cryptocurrencies like Bitcoin and Ethereum are driving significant returns within digital portfolios, with many investors expecting them to continue to perform well in the future.
State Street’s study suggests that private assets could be the first major beneficiaries of tokenization once infrastructure improves and investor confidence grows. The shift towards tokenized assets is seen as a durable trend that is likely to transform capital markets by reducing costs, improving efficiency, and expanding access to previously excluded investors.
Overall, institutional investors are increasingly confident in the potential of tokenized assets to play a significant role in portfolios by 2030. As the adoption of digital assets continues to grow, the financial landscape is poised for significant transformation in the coming decade.