Tokens ermöglichen Investments in non-bankable Assets

The trade in non-bankable assets is on the rise: the market is big – and will grow. nBAs offer an attractive investment opportunity and represent the democratization of asset management. At least that’s what a current report says.

For a long time, doing business with the rich and super-rich, private banking or wealth management was not only considered the supreme discipline of the banking business, but also a sure source of income. In the meantime, digitization has also reached this area and is presenting the banks with new challenges. You can read about how these can be countered and what the current trends and developments are in the studies presented in the Bank Blog.

Non-bankable assets (nBAs) make up around a third of global private wealth. Nevertheless, they are usually associated with high entry barriers for investors. So far, at least, it could look different in the future: Innovative technologies and solutions will enable financial institutions to evaluate, hold and issue nBAs in the form of tokenized assets in addition to traditional assets.

Such assets can be direct investments in private companies, real estate, works of art or rare collectibles such as paintings, luxury vehicles or high quality jewelry. Because calculating risk, pricing, and forecasting returns are more complicated, trading nBAs is more complicated than trading traditional assets.

nBA market shows potential

The possibilities of the nBA market, however, are considerable. The market is large: it is said to have amounted to 18.1 billion US dollars in the fourth quarter of last year. And it will continue to grow. Some experts predict that it could be worth around $ 24 trillion by 2027.

Thanks to modern, constantly evolving technologies, new customer segments gain access to the nBA market. This includes blockchain technology, which enables nBAs to be tokenized and contributes to liquid markets for these assets. The Swiss software company Avaloq believes that non-bankable assets are increasingly becoming part of the portfolios of wealthy and affluent customers. After that, private customers would also deal with it.

This is how nBAs are becoming more popular

Avaloq recently published a report dealing with the subject. The report identifies three key challenges that would need to be overcome in order to make nBA investments more popular.

1. Investors and relationship managers need to understand the risks and returns of an nBA, including its current and future value.
2. Investors must be able to trade non-bankable assets flexibly and conveniently. Liquidity and easy access are critical to greater acceptance of nBA investments. Clear and practicable regulations will also ensure trust and confidentiality.
3. As soon as the barriers to entry, such as minimum investment, drop, nBAs become accessible to larger investor groups such as the mass affluent segment.

Technologies and solutions that allow asset managers and banks to meet the demand for nBAs are important. This includes the valuation and management of tokenized assets. Such platforms lay the foundation for the integration of cryptocurrencies and tokenized securities into regular portfolios. They offer core functions such as tools for the secure storage and management of digital wallets, the seamless connection to the existing banking infrastructure, the fulfillment of legal requirements and the connection with brokers and stock exchanges.

The tokenization of non-bankable assets offers financial institutions and asset managers the opportunity to expand their assets under management and their advisory services, write the authors of the report. This growth strategy promises an increased volume of assets at foreseeable lower costs of customer acquisition – because it can build on an existing customer base. Token-based business models could pave the way for the democratization of asset management.

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