A long-standing trend has been the way in which once hard-to-enter alternative assets have been "democratised"; one route involves the use of "tokens" – those entities made possible via distributed ledger technology known as blockchain and associated with bitcoin.

The author of this article explains the continuing growth, even dominance, of alternative investments of various kinds. This is well-trodden ground in some ways, but Quentin Werlé (main picture) (more on the author below), who is chief financial officer and head of portfolio management at 6 Monks, explains the territory with particular regard to cryptos and the rise of “tokenization.”

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Private market assets under management are growing much faster than public assets. According to forecasts, they will increase by more than twice the rate of public assets, reaching $60 to $65 trillion by 2032. Against this trend, the question is, how can wealth managers meet the expectations and manage portfolios as efficiently as possible?

In the current macroeconomic environment, the answer would be alternative investments. For instance, including them in the portfolio can offer a better resilience. Moreover, alternative assets have lower correlations with broad financial markets, unlike traditional assets, which are highly sensitive to market cycles and macroeconomic shocks. This makes them a better tool for diversification beyond traditional asset classes if they are more resilient to systemic risks. 

Popular alternative assets among institutional investors
Today, considering the advantages mentioned above, we see that institutional investors are increasingly drawn to emerging alternative asset classes. They allocate capital to those linked to technological innovation and structural shifts in the world. Two key areas driving this trend are blockchain technology and artificial intelligence.

Blockchain technology and bitcoin
Bitcoin and blockchain-based assets have gained traction as non-correlated investment vehicles. Several studies have highlighted bitcoin’s low correlation with traditional assets, particularly in times of economic uncertainty, making it an effective portfolio diversifier. For example, a research paper from Fidelity Digital Assets demonstrated that bitcoin maintains an independent return profile compared with stocks and bonds. During market downturns, such as in 2020 and 2022, bitcoin showed resilience at different moments, indicating its potential as a hedge against traditional financial system risks. 

Artificial intelligence
With the rapid development of AI, investors may experience a fear of missing out, that can lead to a surge in investments. One way this is being done is through AI-driven investment funds that use predictive analytics. Additionally, data centres and cloud computing infrastructure play a critical role in supporting AI workloads and digital transformation, making them key investment areas.  

AI-powered automation and robotics are also driving efficiency across various industries, further fuelling investor interest. Overall, such resilience, combined with being a technological breakthrough field, makes AI-related investments a promising opportunity.

Tokenization as a financial revolution for institutional investors
With the development of alternative assets, the ways in which they are stored, traded, and managed are also evolving. In 2025, tokenization will attract even more investors to the AIF market – increased demand for it will push the market to exceed $10 trillion by 2030. 

This innovation excludes the need for intermediaries such as transfer agents and settlement platforms, as shares can be represented as digital tokens on a blockchain. Tokenization also leads to improved transparency and security, offering investors real-time visibility into share ownership while minimising fraud and errors. 

Beyond fund structures, tokenization also makes the alternative assets more liquid and enables a better secondary market trading. Instead of relying on traditional ownership records, alternative assets – such as real estate, private equity stakes, infrastructure, and art – can be represented as blockchain-based tokens. 

A notable example of this shift is Hamilton Lane, an alternative investment management company that has launched tokenized share classes, opening access to high-performing asset classes.  

Governmental interest and the future of institutional adoption
Regulatory clarity also drives institutional adoption of alternative investments, particularly in blockchain-based assets. Governments are increasingly recognising the need to integrate alternative investments into regulatory frameworks. The UK, for example, is now very active in developing comprehensive guidelines for cryptocurrencies. 

For example, the UK’s Digital Securities Sandbox (DSS) aims to facilitate institutional adoption of tokenized securities by bridging traditional finance with blockchain technology. This initiative is expected to significantly enhance capital market efficiency while promoting mainstream financial institutions to engage in tokenized investments.

Similarly, the EU is also taking steps in this direction. In 2023, the European Union adopted the MiCA (Markets in Crypto-Assets) regulation, which introduces uniform rules for crypto assets and their issuers within the EU. This creates a predictable regulatory environment, which in turn encourages institutional investors to work with tokenized assets.

However, regulatory changes could also lead to industry consolidation. Smaller crypto firms and startups' development might be hindered with higher capital and prudential requirements. Although short-term challenges may arise, I still believe in a net positive long-term growth. Some firms may struggle with compliance, and speculative retail trading could decline but institutional investment will only increase, and the market will become only more mature.

About the author
Werlé is a finance professional, certified Réviseur d’Entreprise (CSSF-IRE) with more than 10 years in audit and portfolio management. As head of portfolio management at 6 Monks (6M), he oversees the company’s investment policies, due diligence, and financial operations, ensuring regulatory compliance and sound financial strategies.