London 8th January 2024 – In a ground-breaking move, Goldman Sachs proclaimed the demise of the traditional 60/40 equity-bond portfolio at the start of 2023, advocating for diversification into alternative assets. This paradigm shift is now accelerating, with retail allocations to alternative assets tripling between 2003 and 2018, and McKinsey anticipating a further doubling from 2024 to 2028.
Alternative assets, encompassing private debt, private real assets, collectibles, and private equity, are making their way into the mainstream. This surge in demand, however, presents challenges for investors and intermediaries seeking access to collectibles, a $1.7 trillion category including fine art, wine, and whiskey. Historically, the lack of institutionalization in this sector has restricted participation to ultra-wealthy enthusiasts.
Traditional funds in art, whiskey, and fine wine have struggled to gain traction due to poor liquidity, high minimum investments, and transaction costs. Wealth managers, in particular, are confronted with the dilemma of providing cost-effective access to these assets for their clients.
Enter Tokenisation
Tokenisation, the process of representing ownership rights of real-world assets as digital tokens on a blockchain, emerges as the transformative solution. Advocates highlight its potential for enhanced liquidity, reduced entry costs, and operational efficiencies across various asset classes, as acknowledged by endorsements from industry giants such as BlackRock’s Larry Fink and Citi Bank.
“The tokenisation of real-world assets isn’t a thing of the future; it’s happening now. We estimate that the total market for tokenisation, by conservative estimates, will significantly exceed USD 10 trillion by 2030,” declares Pierre Samaties, Partner at Rolan Berger.
Unlocking Collectibles as an Asset Class
Investors are increasingly turning to tokenisation as the remedy for challenges hindering efficient access to investments like art, wine, and whiskey.
“While tokenisation offers benefits for mainstream asset classes, it is set to totally change the game when it comes to collectibles,” states Callum Woodcock, Founder and CEO of WineFi, a next-generation wine investment platform. “High cost of entry, operational overheads, and illiquidity have prevented widespread access to a huge swathe of the alternative assets market. Tokenisation solves those issues.”
At the core of this perspective is the belief that tokenisation can significantly lower the cost of entry through fractionalisation, allowing ownership to be divided into smaller parts. These fractions can be traded on the open market, enabling investors to navigate illiquid assets efficiently.
Woodcock further emphasises, “Tokenisation gives investors the ability to trade in and out of these closed-ended fund structures in a way that hasn’t been possible before. For asset classes like fine wine, we are already seeing growing intermediary and institutional interest.”
In essence, tokenisation paves the way for the realization of the ‘stock market of everything,’ marking a transformative shift in the financial landscape.
