Legal & General Asset Management (L&G) has launched its suite of liquidity funds on the Calastone Tokenised Distribution (CTD) network.
The CTD network, which connects traditional fund products with digital distribution channels, allows investors to access L&G’s liquidity strategies in tokenised form via blockchain-enabled infrastructure.
“It’s a game changer for the market, because it’s the first time we’ve got true end-to-end tokenisation, fully automated tokenisation of existing or new funds at a scalable point that makes sense for any investors,” Simon Keefe, head of digital solutions at Calastone, part of SS&C Technologies, said.
Calastone is providing the underlying technology for token creation, order routing, trade aggregation, reconciliation and on-chain settlement functionality, integrating with existing fund administration processes.
This approach allows L&G to expand distribution reach while maintaining operational efficiency in a safe and secure environment and continuing to provide a strong service to investors.
Ross McDonald, liquidity investment specialist at L&G, said: “We’ve been going on this journey of making our funds available in the digital format for a little over two years, and this is the second or third step we’ve taken in this journey that we plan to continue on.”
Within L&G Global Markets, liquidity funds are available in US Dollar, Euro and Pound Sterling and aim to provide investors with capital preservation, same-day settlement, and a competitive yield.
Building on a legacy
L&G has been a provider of liquidity funds for decades, currently managing over £50 billion in liquidity assets, now available in tokenised format. Tokenisation provides further accessibility for new digital investor segments and supports evolving client preferences for efficient digital solutions.
For Calastone, the business has worked in the tokenisation space for over 10 years. Keefe said: “The obvious place for us to start in the tokenisation space would have been distribution, and we were asked many times by DeFi and traditional finance companies to look at how we can enable distribution over those years.
“But in reality, there wasn’t anything on the other side of the conversation, on the demand side, to buy tokenised funds up until probably two or three years ago. In those two or three years, we’ve seen the demand really start to accelerate.”
The current state of the digital assets industry
Both companies project widespread adoption of digital assets in the next two to five years, although some investors will be slow off the mark.
McDonald said: “I haven’t seen it firsthand, but I’ve heard rumours that we still receive fax orders. So there’s a long way for those types of investors to move before they’re comfortable executing on blockchain.
“Over the next couple of years, we’ll start to see the early adopters get entrenched in this and use it day in, day out, and prove to the rest of the world that it works. And then the more traditional investors may start to come on board in the next two to five years.”
However, adoption is still region-dependent. With the US and parts of Asia enacting digitally friendly policies, investors there are already more comfortable buying tokenised real-world assets (RWAs) in their own wallets.
Keefe said: “From a UK and European perspective, the adoption in other regions has been noticed, and we’ve certainly seen in the last six months a massive uptick in activity from participants in the traditional ecosystem, actively working to get into the tokenisation space.”
The importance of interoperability
Tokenised versions of the funds will initially be available on Ethereum and EVM-compatible blockchains with a wider range of chains to be available over time.
Keefe said: “We’re trying to take the friction out of the process with the CTD network, to make it easy for asset managers to distribute and innovate their products and meet their clients when they want to do business.”
McDonald added: “The last thing you want is to hire big teams and spend a lot of resources, time, energy and capital in building something that isn’t open architecture. Having that nimbleness was crucial to us.”
Looking ahead
McDonald highlighted that the firm has focused on its higher liquidity products, including money market funds, as those are some of the most in demand.
“We have aspirations beyond that as an asset class and are looking across the whole spectrum of asset management products that we offer,” he said.
For Calastone, the next project is set to go beyond distribution. Keefe said: “This product is the entry point into the collateral ecosystems that we’re building and others are building around the marketplace, using tokenised funds as real-time collateral instruments, so that’s our next focus.”
See also: Legal & General IM’s money market drive Tokenisation: asset management’s new imperative,
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