Bain & J.P.Morgan – Tokenization, 2023

Tokenization is a method that can streamline and simplify alternative investments, benefiting both individuals and institutions. It can also improve liquidity, automate capital calls, and enable portfolio customization. Implementing tokenization in the alternative asset management industry could potentially result in an additional $400 billion in annual revenue. Traditionally, alternative investments have been marketed to institutional investors due to their complex nature and longer investment horizons. However, the lack of common infrastructure and standards among these investments has made them cumbersome to manage. Alternative asset managers typically only accept large-ticket investments, limiting access for individual investors. Despite this, alternatives managers have been trying to expand access to individuals for years. Research shows that individuals control over half of global wealth, yet only around 5% of their wealth is allocated to alternatives. High-net-worth investors are particularly under-allocated, with only about 5% of their portfolios allocated to alternatives. A survey of high-net-worth individuals found that 53% of those with $5 million or more in assets plan to increase their allocations to alternatives in the next three years, primarily for improved diversification and higher returns. The main reasons cited to accelerate allocations to alternatives are enhanced liquidity, increased transparency, better performance, and easier access to alternative products. Major alternative managers, such as Blackstone, KKR, Carlyle, and Apollo, have started focusing more on individual investors as they recognize the opportunity to expand into this segment.