abrdn is using distributed ledger technology to democratize investment opportunities and increase financial inclusion. From unlocking wider participation for smaller investors, to increasing liquidity for many asset classes, and streamlining processes abrdn’s innovative approach is transforming the financial landscape.

$4T

Projected Value by 2030

$21B

Lux Money Market VALUE

421M

Number of Tokens Minted

By partnering with Hedera, we can make previously restricted asset classes accessible to a wider range of investors. This aligns perfectly with our commitment to financial inclusion and creating a more equitable investment landscape.

Duncan Moir

Senior Investment Manager,
abrdn

Headshot

Industry

Finance

Use Case(s)

Tokenization of Real-World Assets

Overview

abrdn leverages the security and efficiency of the Hedera public network to tokenize part of their money market funds. The Hedera network facilitates instant, low-cost transactions, fostering a transparent and accessible investment experience for individuals and institutions alike.

Challenge

Traditional finance often excludes smaller and individual investors due to a combination of factors: high minimum investment amounts, restrictive accreditation requirements, and limited access to alternative asset classes. Additionally, the slow pace of innovation in fund management creates inefficiencies and costs that further restrict opportunities for these investors.

Solution

abrdn uses the Hedera network to democratize access to investment opportunities for small and individual investors. By tokenizing money market funds and their payouts to investors, abrdn is innovating the future of finance through immediate settlement, enhancing market liquidity and fostering greater financial accessibility and participation.

The need for innovation in finance is now

The track record for innovation in today’s financial markets can be best described as a mixed bag. While the rise of fintech has certainly helped to push traditional, slow-moving investment organizations toward smarter use of technology to help create new opportunities for their customers, the finance sector in general often moves slowly, with some participants finding themselves behind the curve of technological innovation.


This slow movement disproportionately impacts small and individual investors, who are left with few options and opaque structures that limit their ability to participate or have access to the same investment opportunities as institutional investors. That’s where abrdn is making a difference. abrdn is a global investment company that is working to reshape the investor experience through technology-driven initiatives. abrdn is actively removing barriers and democratizing access to investment opportunities.

How is abrdn doing this?

The team at abrdn are constantly exploring new technologies like distributed ledger technology (DLT) and artificial intelligence (AI) and how they can implement these into their business to both improve their internal processes as well as create innovative investment solutions for all of their clients. This forward-thinking approach positions them very well to create and deliver investment opportunities that more traditional financial management organizations will simply be unable to offer, especially to small and individual investors. Many of these types of organizations rely on outdated systems that limit agility and innovation. abrdn is laser-focused on avoiding this and tokenization is one of the paths that they are taking to do so.


Democratization through tokenization

As previously mentioned, small and individual investors are often unable to take advantage of some of the same investment opportunities as high value, institutional, and accredited investors. abrdn is bucking this trend by tokenizing a portion of their $20bn+ money market fund range on the Hedera public network, a DLT.


This new approach offers several advantages for investors. Traditionally, some money market funds can be tough for smaller investors to access due to high minimum investment amounts as well as the various fees covering administrative, legal, and accounting costs that create a barrier to entry.


Tokenizing a money market fund on a DLT solves these problems in a number of ways. First, it streamlines administrative tasks, reducing costs for fund managers. These savings can then be passed on to investors through lower fees. Second, and perhaps most importantly, tokenization allows for fractional ownership. This means investors can buy smaller portions of the fund, making it accessible to more investors, regardless of their starting investment amount.


This democratization of access to money market investments promotes financial inclusion and enables a much wider range of investors to participate in low-risk, stable return opportunities. It also opens the door to new opportunities that investors can capitalize on, regardless of how much they have in the fund.


“While the use of DLT is strategic, it is also something that fits into our drive to apply technology into our existing business to not only create efficiencies for ourselves, but also deliver new opportunities to our clients – all of our clients. Opportunities that they would not have been able to take advantage of otherwise. We also like to be involved from a strategic standpoint with technology that we believe will drive the future of finance”, says Duncan Moir, senior investment manager at abrdn.


Tokenizing the fund does more than just democratize investment, it also promotes greater liquidity in a number of key ways. By enabling the trading of tokens on an over the counter, or secondary market (for example on a decentralized exchange) investors gain increased flexibility in managing their holdings. Additionally, the transparency inherent in DLT technology provides investors with a clear and immutable record of ownership and transactions, enhancing trust and security in how they move their tokens.


Finally, transactions on the Hedera network take place instantly, eliminating the waiting periods associated with traditional fund settlements. In the case of abrdn’s fund, which pays a monthly dividend when fund performance is positive, this is good for all of their fund investors. The reason being that it often takes legacy financial systems as long as five business days to settle the payment of any dividend funds. Usually, investors like to reinvest these dividends back into their fund holdings in order to take advantage of the interest offered on the investment. By not having the ability to earn and reinvest this dividend payment immediately, they lose out on this benefit. abrdn is empowering their investors to move much more quickly and efficiently with their investment.


This quick turnaround enhances liquidity by allowing investors to access and utilize their capital faster.


This is just the beginning for abrdn. As the enthusiasm and investment activity in their Lux Sterling fund grows, there is the potential for expanded tokenization of the fund as well as opportunities to do the same for other assets managed by abrdn.


Why Hedera?

abrdn's decision to tokenize part of its money market fund range on the Hedera network was an incredibly significant move that made the financial world take notice as it signaled abrdn’s confidence in the technology's potential to transform traditional finance. The move to use Hedera was made due to a number of factors.


One of the main aspects of Hedera that appealed to abrdn is the scalability and speed of the network versus traditional blockchains. Thanks to Hedera's unique architecture, which is rooted in the hashgraph consensus mechanism, the network is able to process up to 10,000 transactions per second at an average cost of $0.001 for each transaction.


This is incredibly beneficial for money market funds, where near-instantaneous settlement and minimal transaction costs are highly important. Thanks to this, abrdn can tokenize shares in the fund, manage redemptions, and facilitate trades at scale without sacrificing efficiency.


Other aspects of the Hedera network that appealed to abrdn were the security of the network as well as the governance structure. Security breaches are a major concern for any organization but are even more critical in the financial sector. Hedera's robust security measures, including its use of asynchronous Byzantine Fault Tolerance (aBFT), which not only guarantees transaction finality and immutability, but also ensures transactions cannot be reversed or tampered with, even in the event of malicious attacks or network disruptions – all of which is critical for high-volume financial transactions.


The governance structure of the network is in the form of a governing council composed of a rotating body of 39 reputable organizations like IBM and Google, with a clear mission: to ensure the stability, security, and long-term sustainability of the Hedera network and foster trust within the ecosystem. abrdn was so confident in the structure of the council to ensure that the Hedera network would be able to execute its mandate that they joined it themselves, not just to leverage the network's benefits, but also to shape its future.


This carries over into the network's commitment to being regulatory compliant. Tokenizing financial assets is going to be faced with potential regulatory challenges. abrdn needed a DLT platform that could navigate these complexities. Hedera's focus on regulatory compliance and its Governing Council's diverse expertise position it well to address evolving regulations. This alignment with abrdn's commitment to responsible innovation was key.


abrdn's choice goes beyond just the technical capabilities of the network. They also see Hedera has a collaborative ecosystem with a strong focus on building real-world applications. This aligns with their vision of leveraging distributed ledger technology to transform the asset management industry.


What Hedera services does abrdn leverage?

While abrdn is enjoying the overall capabilities of the Hedera network, there are two services in particular that are providing the greatest value: the Hedera Token Service (HTS) and the Hedera Consensus Service (HCS). HTS allows abrdn to easily create and manage tokens representing shares in their Lux Sterling money market fund. This includes the abilities to mint, burn, manage ownership, and facilitate token transfers. Additionally, HTS offers regulatory compliance features that align with abrdn's commitment to responsible innovation. HCS ensures each action happens instantly, reliably, and at minimal cost. The HCS also guarantees every transaction is finalized and tamper-proof, building trust and confidence within the fund.

What’s next for abrdn?

abrdn believes that tokenization is part of the future of finance thanks to its ability to enable fractionalized investing as well as its ability to greatly streamline many of the legacy processes that exist in financial transactions.


Per Mr. Moir, “We’re excited to see where this goes and how we can help Hedera find more use cases in financial services.”


Not only does abrdn anticipate expanding their own tokenized offerings to their clients, but by promoting the success of this initiative, anticipate there to be more interest in fractionalized investing for other asset classes. For example, in real estate where tokenization allows fractional ownership of properties, enabling broader participation and investment in very high value properties and potentially higher liquidity. Or in private equity and venture capital where fractionalized investing can allow individual investors to participate in high-growth opportunities such as investments in startups, which have completely excluded these participants.


abrdn’s innovative approach truly gives us a glimpse of the future of finance, and the future looks exciting – and equitable, and Hedera is excited to be a part of this.

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Hedera is not affiliated with, and does not sponsor or endorse this project.

Industry

Finance

Use Case(s)

Tokenization of Real-World Assets

Overview

abrdn leverages the security and efficiency of the Hedera public network to tokenize part of their money market funds. The Hedera network facilitates instant, low-cost transactions, fostering a transparent and accessible investment experience for individuals and institutions alike.

Challenge

Traditional finance often excludes smaller and individual investors due to a combination of factors: high minimum investment amounts, restrictive accreditation requirements, and limited access to alternative asset classes. Additionally, the slow pace of innovation in fund management creates inefficiencies and costs that further restrict opportunities for these investors.

Solution

abrdn uses the Hedera network to democratize access to investment opportunities for small and individual investors. By tokenizing money market funds and their payouts to investors, abrdn is innovating the future of finance through immediate settlement, enhancing market liquidity and fostering greater financial accessibility and participation.

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