Janus Henderson follows BlackRock and Fidelity into tokenization

Janus Henderson becomes the latest major asset manager to experiment with tokenizing securities, joining a trend that industry observers believe will cut many costs and disrupt the industry.

The $360 billion U.S. asset manager plans to take over management of the $11 million Anemoi Liquid Treasury Fund, which invests in short-term U.S. Treasury bills. Tokenization refers to the process of converting units within a fund into unique digital tokens on the blockchain.

Janus Henderson follows in the footsteps of BlackRock, Fidelity International, and Franklin Templeton, which already operate tokenized Treasury and money market funds on public blockchains.

The firm is stepping into the world of on-chain capital markets by taking over the day-to-day operations of the Anemoi Fund, an open-ended British Virgin Islands-domiciled fund that was established in December and is open to non-U.S. professionals. There is. investors.

But Nick Charney, head of innovation at Janus Henderson, said the move was “to ensure we are well-positioned for the future”.

“There is a real opportunity to participate and contribute to shaping the future. I think it is very likely that significant parts of the architecture of the financial system will move to distributed ledger technology,” Charney said.

“We see significant benefits in the way we deliver financial services to customers. It's not entirely clear what this will look like over the next five to 10 years.”

Charney believed that blockchain technology “has the potential to eliminate many steps, burdens and costs.” This is a more efficient way to get financial products into the hands of investors by reducing the number of intermediaries. ”

MJ Lytle, CEO of Tabla Investment Management, the division of Janus Henderson that manages the fund, said management fees have fallen significantly in the investment industry, but costs have not fallen as quickly. As a result, profit margins have been compressed.

He believed that blockchain technology could help address this issue. “With traditional structures, it's difficult to reduce costs as fast as they should,” Lytle said.

“Custodial, management, basic execution and retention of assets is a very intensive process at the moment and involves so many people,” he added.

“For large storage and management providers, it's very difficult to reduce your cost base because it's very difficult to reduce the hundreds of thousands of people who work for you.”

A “trustless” decentralized blockchain could remove some of these costs, Lytle thought. “There's no need for things like independent third-party storage or clearing. All of those costs can be eliminated,” he said.

Tokenization allows investors to trade units in a fund at any time and benefit from “nearly instant” settlement, said Martin Kuensel, co-founder and chief executive of “Web3-native” asset management firm Anemoi. said.

To facilitate this, Kuensel said it has built a network of paid market makers and liquidity providers.

Anil Sood, chief investment officer and co-founder of Anemoi, said the fund's tokens, which currently yield more than 5%, can also be used as collateral for other blockchain transactions.

He said these provide an alternative to so-called stablecoins such as USDC and Tether, digital tokens that are designed to be pegged to real-world assets such as the US dollar but have zero yield.

The combined market capitalization of these stablecoins has now grown to $170 billion. If stablecoins were likened to a country, they held $120 billion in assets as of June, making them the 18th largest holder of U.S. Treasuries, ahead of South Korea and Germany. Tagus Capital is a cryptocurrency investment fund.

Anemoi is planning a second on-chain fund to invest in music-based intellectual property.

Sood, who has experience in exchange-traded funds (ETFs), believes that in the long term, tokenization could pose a threat to the rapidly growing ETF industry, which is currently eating into the market share of more traditional mutual funds. I thought there was.

“We've seen a lot of people converting mutual funds into ETFs,” Sood said. “In the future, this step will be overlooked. Mutual funds will be incorporated directly into the digitized token structure.”

“As BlackRock, Fidelity, Franklin Templeton and Janus Henderson join this space and are talking about this with clients, we think it will see mass adoption beyond[the current niche]. I know you are deaf.

Charney also believed this could be the case.

“If you go back 20 years to the ETF industry, there were a few players who understood their ability to disrupt the investment industry. Today, that's obvious to virtually everyone,” he said.

“I think this will be as disruptive as ETFs, perhaps even more so. Decentralized blockchain technology could do for ETFs what ETFs have done for mutual funds. is quite expensive.”