In this first edition, we focus on the emerging role of tokenisation and how it may unlock new opportunities to address investors’ expectations and adapting to evolving market dynamics.
Trend
Tokenisation of real estate and infrastructure investment vehicles is increasingly explored by investment managers and sponsors as a way to offer solutions addressing investors’ demand for liquidity and flexibility as well as the market appetite for innovative digital financial products, particularly in the context of long-term strategies and large-scale investments, thereby setting the stage for secure and scalable tokenised investment structures relying on blockchain technology.
- Meeting liquidity and flexibility needs in long-term, high-ticket strategies – For funds investing in real estate and infrastructure with long holding periods and significant capital commitments, tokenisation can support secondary transfers of interests, enabling investment managers and sponsors to offer investors more reliable and flexible entry and exit options, while remaining fully aligned with the long-term nature of the underlying assets.
- Making large-scale assets more accessible and attractive to investors – In many real estate and infrastructure strategies involving large-scale projects and high investment tickets, tokenisation enables the fractionalisation of fund units, allowing investment managers and sponsors to offer exposure to such assets to a broader and more diversified range of investors with smaller investment tickets.
- Enabling and executing investor mobility more efficiently – From the investment managers and sponsors’ perspective, the use of tokens can facilitate and accelerate changes in the investor base by simplifying transfers processes and even automating operations through smart contracts (capital calls, distributions, reporting, etc.), thereby reducing operational cost while enhancing security, compared to traditional unit transfers.
Luxembourg context
Investment managers and sponsors benefit in Luxembourg from a supportive legal framework, notably the series of Blockchain Laws, which unlock the tokenisation of investment vehicles and fund units. The CSSF has adopted a supportive stance and has already granted the first dedicated licence of control agent under this regime, providing investment managers and sponsors with a clear and workable regulatory basis to implement tokenised fund and vehicle structures. This is now illustrated by early and successful Luxembourg-based tokenisation initiatives in the real estate space, such as WeInvest Capital Partners, BlocHome and Digibrixx.
How can we assist?
We advise and support investment managers and sponsors on the legal, regulatory and tax structuring of tokenised investment vehicles (including funds and SPVs), covering in particular the design and implementation of tokenisation models, the issuance of tokens and the structuring of compliant transfer mechanisms for tokenised units, whilst ensuring the resilience of such models against the new challenges of increasing volatility of the tokenised assets, as well as the technical threats of the underlying technical infrastructure.
