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A 2023 research report by Calastone revealed that both asset managers and their service providers confirmed a slowly emerging consensus: tokenized funds are expected to enter the mainstream within the next three to five years.
As the demand for innovative financial products and services continues to grow, fund tokenization is emerging as a transformative force in the investment landscape, creating new growth opportunities for fund managers. Two years after the Calastone report, this shift seems to be particularly relevant in Luxembourg, where the 2025 EY Global Wealth Management Research highlighted that 55% of investors prioritize a diverse selection of investment products and services when choosing a primary wealth management provider. In contrast, across Europe, the main factor influencing the choice of a primary wealth management provider is investment performance (54%), followed by the range of investment products and services (49%). Luxembourg’s stronger focus on product and service diversity may be driven by its position as a global financial hub, attracting an international clientele with complex and varied financial needs.
The research further reveals that 53% of Luxembourg respondents currently utilize digital assets, with an additional 32% expressing interest in adopting them in the future. This indicates a robust and increasing acceptance of digital assets within the Luxembourg market, suggesting that investors are becoming more open to exploring new financial innovations. Moreover, when asked about their plans to adjust portfolio allocations over the next three years, 55% of Luxembourg respondents expressed their intention to increase investment in digital assets.
This statistic not only reflects a strong potential interest among investors in digital assets but also hints at a growing appetite for novel investment products and services, such as tokenized funds. The convergence of increasing demand for diverse investment options, the rise of digital assets, and the potential for tokenized funds presents a compelling opportunity for fund managers to innovate and grow in the market.
Additionally, attitudes toward tokenization are broadly consistent across asset classes, with most firms either exploring or already implementing projects, suggesting a general industry shift rather than asset-specific trends.
Significantly, major players have already advanced into fund tokenization, with one large asset manager launching a digital liquidity fund on Ethereum in 2024. Other major players, have since also launched tokenized funds, further underscoring the growing momentum and institutional interest in this emerging space.
As the investment landscape evolves, the benefits of fund tokenization for clients become clear. This innovative approach provides several advantages that reshape the market; here are several examples:
Accessibility
- Tokenization enables fractional ownership, allowing investors to participate in high-value assets with significantly lower capital requirements, making it possible for retail investors to enter markets that were once reserved for institutional players due to high minimum investment thresholds.
- It improves liquidity by enabling 24/7 trading and fractionalized asset structures, which make it easier for investors to buy and sell portions of traditionally illiquid assets, such as real estate or private equity, without waiting for long lock-up periods or complex exit processes.
- It simplifies the investment process by offering a faster, more digital, and less administratively burdensome experience, reducing paperwork, intermediaries, and settlement times, and making investing seamless and user-friendly for a broader audience.
Diversification
- Tokenization empowers more diversified and personalized portfolios by enabling access to a broader range of asset classes, including semi-liquid and alternative investments tailored to specific investor goals.
Cost efficiency
- Once the blockchain wallet is set up, investors can benefit from reduced transaction costs by minimizing reliance on intermediaries, reconciliation processes, and administrative overhead.
- On-chain settlement accelerates execution, reducing delays and operational inefficiencies throughout the investment lifecycle.
Building on these investor benefits, the evolving landscape of tokenized funds also presents a range of strategic opportunities for fund managers.
Opportunities for fund managers
Digital assets are gaining significant traction among investors in Luxembourg, with millennials leading the charge. According to the 2025 EY Global Wealth Management Research, 60% of millennials reported actively using digital assets, while an additional 40% expressed interest. Gen Z is not far behind, with 59% already using digital assets and 24% showing interest. Among very high net worth (VHNW) individuals, 60% have expressed interest in this emerging asset class, while notably, 100% of ultra high net worth (UHNW) individuals have shown interest.
Each group is motivated by unique needs and behaviors, making them strong candidates for tailored digital asset strategies.
Retail investors
This segment includes retail investors who have traditionally been excluded from certain asset classes due to high entry barriers. Tokenization enables fractional ownership, opening the door to previously inaccessible opportunities such as private equity, real estate, and infrastructure. For these investors, tokenized funds represent a path to greater diversification and financial inclusion.
Digital natives and early adopters
Millennials and Gen Z investors are digital-first by nature. Comfortable with technology and open to innovation, they are naturally inclined toward blockchain-based financial products. Their expectations for efficiency, and user-friendly platforms align well with the benefits of tokenized funds, making them a key demographic for early adoption
High net worth individuals (HNWIs)
HNWIs are increasingly looking to diversify their portfolios with alternative assets that offer both growth potential and liquidity. Tokenized funds provide a compelling solution by enabling access to niche or illiquid markets, faster settlement times, and more flexible portfolio construction. For this segment, tokenization is not just a trend; it’s a strategic tool for wealth optimization.
Tokenized funds can unlock new capital and boost investor engagement by meeting the needs of different types of investors. For fund managers, this means a clear opportunity to grow revenue and reduce operational costs.
As adoption accelerates, it is poised to become a driver of the future investment landscape. However, capturing these benefits requires navigating a complex environment shaped by legal, regulatory, and technological challenges.
In this context, Luxembourg distinguishes itself with a forward-looking and supportive regulatory framework. The CSSF can evaluate tokenized fund proposals and provide guidance to improve their structure and compliance. Luxembourg’s Blockchain Law IV, combined with EU regulations like MiFID II and MiCA, creates a robust and innovation-friendly environment for the tokenization of investment funds and blockchain-based business models. While the regulatory framework is there, market players will need to adopt an open and progressive stance toward fund tokenization. This move will be critical to secure Luxembourg’s position as a leading global hub for financial services. As the competition increases, countries that can propose innovative ways of distributing financial services will be better positioned to attract investment and achieve long-term growth.
That said, the high cost of meeting regulatory, governance, and technological standards can create significant barriers to entry, particularly for smaller firms and new market participants. Without adequate support from a complete ecosystem , this could limit broader participation and slow the pace of innovation.
Thus, fund managers should consider the implications of fund tokenization within their operational framework. Conducting an impact assessment can help evaluate how tokenized assets may improve profitability while meeting evolving investor needs.
How EY can help
In Luxembourg, we are proud to have among our clients some of the most important players in the digital commerce industry. We provide support on a range of topics, spanning our assurance, consulting and tax service lines. Some of our services include the following:
- Assurance: Annual external assurance, internal audit, risk management and controls, and extended assurance including Know Your Customer (KYC) and anti-money laundering (AML)
- Consulting: Digital asset strategy definition & product development, crypto-asset service provider (CASP) licensing & regulatory compliance, cybersecurity & outsourcing assessments, and digital finance training
- Tax: Global compliance & reporting, tax advisory, tax calculations on crypto holdings, and tax structuring
We serve a range of clients on the above matters, including, but not limited to:
- Investment fund managers (management companies, alternative investment fund managers)
- Virtual asset service providers (VASPs) and crypto-asset service providers (CASPs)
- Payment institutions and e-money institutions
- Custodians and depositaries
- Digital asset banks, traditional and central banks
- Cryptocurrency exchanges
- Governments and regulators
This article has been written with the support of Claire Briand, Consultant, Banking and Capital Markets.
Summary
As the demand for innovative financial products and services continues to grow, fund tokenization is emerging as a transformative force in the investment landscape, creating new growth opportunities for fund managers. Two years after the Calastone report, this shift seems to be particularly relevant in Luxembourg, where the 2025 EY Global Wealth Management Research highlighted that 55% of investors prioritize a diverse selection of investment products and services when choosing a primary wealth management provider. In contrast, across Europe, the main factor influencing the choice of a primary wealth management provider is investment performance (54%), followed by the range of investment products and services (49%). Luxembourg’s stronger focus on product and service diversity may be driven by its position as a global financial hub, attracting an international clientele with complex and varied financial needs.
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