As the digital asset sector continues to expand, Aviva Investors is closely monitoring developments, particularly the increasing activity around stablecoins and tokenised money market funds (MMFs).
The £238bn asset manager, tied to insurance giant Aviva, has yet to launch any new funds or tokenise existing ones but is actively exploring the potential of this nascent technology and innovation.
Speaking to Capital Pioneer, Alastair Sewell, investment director, noted the mixed history of interest in the sector but highlighted a recent shift.
“Over roughly the last year or so, interest has increased,” he said, attributing this to a “material level of assets in stablecoins” and growing activity in tokenising MMFs. Sewell is also chair of the Institutional Money Market Fund Association, a role with a tenure until July 2027.
The uptick signifies that “people are beginning to experiment,” he said. “They’re beginning to identify use cases and trying to figure out what actually has traction, what will actually work for investors, what will actually, genuinely solve a problem.”
As one of the UK’s largest and oldest fund managers, Aviva Investors is taking a pragmatic approach, “monitoring developments very closely… looking at how this segment develops and is looking to explore the potential that it brings,” Sewell said.
Among the three principal use cases for tokenisation, the collateral use case holds the most interest for Aviva Investors, aligning with where “there’s most market traction,” according to Sewell.
This involves tokenising MMF shares to facilitate faster and easier transfers for purposes such as meeting variation margin payments to derivative counterparties. As a subsidiary of an insurance company, Aviva Investors sees direct relevance and benefit to its operations.
Servicing the parent group, a “key customer,” through more efficient transactions via tokenisation is “absolutely something we’d do,” he said.
Sewell identified MMFs as the “obvious starting point” for its exploration, given the current market activity and Aviva Investors’ “large and well-established money market franchise.” Beyond this, more speculative applications include the “mass customisation of multi asset portfolios” and assisting “distribution efforts, in particular on the private markets side.”
A crucial, albeit less tangible, benefit is the learning experience. “By tokenising a MMF, we’re going to learn a lot about tokenisation,” Sewell explained. This “institutional knowledge or gain can then potentially be applied into other areas of business.”
Yet, Sewell cautioned against excessive hype. “We have to be pragmatic. Most of the projects and efforts underway now are likely to fail, but there will be some that come out of it that are runaway successes, and it is very helpful to be one of those.”
