Today Italian asset manager Azimut Group announced that its subsidiary has tokenized units in an asset backed securities fund, AZ RAIF 1. The solution used the Allfunds Blockchain as the project’s first stage to assess the efficiencies in transferring fund units between investors and Azimut Funds. BNP Paribas Securities Services is the service provider and has integrated Allfunds’ solution with its legacy systems.
In addition to efficiencies, the aim is to enable real time transparency about transactions, with the hope that tokenization will open up the funds to a wider pool of investors going forward. While this is not a native tokenization, so the conventional fund exists in Luxembourg, the plan is to trial a native blockchain-only fund going forward.
AZ RAIF 1 is an alternative investment fund where the assets that underpin the fund are non performing loans and debts of insolvent companies.
The three companies previously worked together when Allfunds launched its FAST data sharing solution in Italy, with 15 other participants involved.
Azimut claims to be a pioneer in funds and tokenization, and to its credit, it is. In 2021 it tokenized a $6 million fund of SME loans with digital asset bank Sygnum. It is also active on another blockchain-based funds distribution platform, Luxembourg’s FundsDLT. And as an asset manager, it invests in the blockchain and digital assets sector.
“The tokenization paves the way for a greater inclusion in clients’ asset allocation as the technology enhances the liquidity profile of investments in private markets,” said Giorgio Medda, Azimut Group CEO. “Our next step will be the launch of a fund with native tokenized units which will allow us to fully leverage the operational benefits of the blockchain technology along the whole value chain of our industry”.
Allfunds Blockchain is a subsidiary of the larger fund distribution platform, Allfunds, which has €1.3 trillion in assets under administration. The group was briefly subject to a €5.5 billion bid from Euronext in February. The blockchain division provides data sharing and tokenization solutions. So far, it has been most active in Spain and Italy.
Meanwhile, BNP Paribas Securities Services is initially targeting funds for its tokenization efforts, although it has also been involved in a bond token for EDF. “BNP Paribas has been looking into the DLT space for fund distribution for several years and we consider the technology to have the potential to improve efficiency and transparency in the fund industry,” said Paul Daly, Head of Distribution Products and Solutions, BNP Paribas SS.
Blockchain benefits for funds, asset managers
For asset management, blockchain offers numerous potential benefits. As discussed here, two are improved efficiencies in distribution, and potentially greater liquidity.
Other benefits can be gleaned by applying blockchain to the underlying assets. One avenue is to use blockchain to share real time performance data on the underlying assets backing the funds, such as Intain’s administration solution. However, that might be more useful for asset-backed securities involving regular payments rather than non performing loans.
Another potential benefit is when the assets included in the fund are themselves tokenized, allowing mass customization potential for fund management.