Tokenized Assets: Redefining Portfolio Management

Tokenized Assets: A New Era in Portfolio Management

For decades, investment portfolios have been guided by the principle of efficient markets, a theory that has shaped modern portfolio theory and led to the dominance of index funds. However, as we enter a new era of digital finance, tokenized assets present an opportunity to broaden investment horizons and challenge traditional models.

The genesis of modern portfolio theory can be traced back to the early 1970s, when Burton Malkiel's seminal work on index funds was published, and John Bogle launched the Vanguard S&P 500 fund. This strategy, focusing on broad diversification and minimal trading, has proven successful despite the flaws in the underlying theory of investor rationality, as highlighted by behavioral psychologists like Daniel Kahneman and Amos Tversky.

Regulatory frameworks governing institutional investing reinforce the reliance on proven strategies, with fund managers prioritizing client interests and mitigating risk. As a result, portfolios are heavily allocated to assets with long, established track records, such as government bonds and passive equity funds. New asset classes are initially sidelined due to a lack of long-term, daily data, limiting the universe of investable assets.

Tokenization and on-chain transactions offer a scalable way to package any kind of asset and generate transparent, comparable data on asset values. By representing real-world assets as digital tokens on a blockchain, we can begin to generate the kind of daily, market-derived data that has traditionally been reserved for a narrow set of assets.

Consider the potential for a diversified retirement portfolio to include Thai real estate. Under current models, the answer is obscured by a lack of reliable, continuous pricing data. However, if Thai real estate were tokenized, it could eventually be measured against the same metrics used for U.S. equities, forcing a re-examination of the static, index-based approach that has dominated investment strategy for so long.

The implications for global finance are significant. Alternative strategies currently comprise no more than 15-20% of most funds. Changing academic data on investment options would put the other 80% up for grabs, allowing investors to gain exposure to asset classes and geographic regions previously ignored due to data scarcity or illiquidity.

As tokenized assets build track records, fiduciaries may find themselves compelled to recalibrate their strategies, leading to a more accurate picture of global