Tokenization’s Biggest Opportunity Is in Customized Portfolios, NYLIM’s Cai Says

The biggest opportunity for tokenization is not in payments or trading efficiency, but in building customized portfolios for investors, Thomas Cai, head of multi-asset solutions at New York Life Investment Management, said.

In an interview with CoinDesk published July 5, Cai said the future of asset management lies in customization and that blockchain is the only technology capable of delivering it at scale.

He said the current financial system has limits in providing client-specific portfolios across assets such as exchange-traded funds, bonds and private credit. Tokenization can help overcome those constraints.

The ultimate goal is not simply to combine multiple assets, Cai said, but to embed customized features into the assets themselves. Tokenization can also simplify back-office processes such as reconciliation and settlement, reducing costs.

If operating costs can be cut by 10% to 20%, clients can also achieve better outcomes, he added.

NYLIM has recently been working with Centrifuge, a real-world asset, or RWA, tokenization project associated with CFG, on a project to move its high-yield corporate bond strategy on-chain.

Still, infrastructure such as tokenized collateral, central clearing and prime brokerage must mature further before institutional participation in decentralized finance, or DeFi, expands in earnest, Cai said. DeFi clearly has potential, but it will take more time before it becomes an institutional market, he added.