UBS Asset Management, a division of Switzerland's largest financial holding, has announced the launch of its inaugural pilot for a tokenized Variable Capital Company (VCC) fund on Monday. The move is part of the ongoing trend of tokenization in the world of finance, as blockchain technology continues to be integrated into traditional financial systems.
The firm's in-house tokenization service, UBS Tokenize, will be used to initiate a controlled pilot of a tokenized money market fund. This fund comes in the form of a smart contract on Ethereum and allows the firm to facilitate fund subscriptions and redemptions. The VCC is a legal entity for investment funds in Singapore that was introduced in January 2020 to bolster the city-state's position as a hub for fund management activities.
UBS Group, the parent company of UBS Asset Management, is a prominent player in the Capital Markets industry with a market capitalization of $78.554 billion as per InvestingPro's real-time metrics. The company has been aggressively buying back shares and trading at a low earnings multiple of 2.29, indicating a potential undervaluation.
"This is a key milestone in understanding the tokenization of funds, building on UBS's expertise in tokenizing bonds and structured products," said Thomas Kaegi, Head of UBS Asset Management, Singapore and Southeast Asia. He added that UBS will collaborate with both traditional financial institutions and fintech providers within this initiative. The goal is to gain insights into how to enhance market liquidity and provide better market access for their clients.
The pilot is part of Project Guardian, an initiative led by the Monetary Authority of Singapore (MAS) that aims to tokenize various real-world assets. Tokenization is the process of converting ownership or rights to physical assets into digital tokens on a blockchain or distributed ledger. This approach uses blockchain technology to transform tangible assets like real estate, artwork, stocks, or commodities into digital tokens that can be conveniently purchased, sold, and traded on a blockchain network.
As per InvestingPro Tips, UBS Group has seen a strong return over the last three months, reinforcing its position in the market despite the fact that the revenue has been declining at an accelerating rate. The company has also maintained dividend payments for 12 consecutive years, offering a dividend yield of 2.19%, and the stockholders have been receiving high returns on book equity.
Prior to this development, UBS has been active in the blockchain space. In November 2022, JP Morgan Onyx, DBS, and SBI Digital Asset conducted trials for foreign exchange transactions and government bond trades using the UBS Tokenize platform. The platform was also utilized in Hong Kong for the recent issuance of digital structured notes by Bank of China Investment (BOCI), amounting to CNH 200 million ($27.3 million).
At the end of last year, UBS launched the world's first publicly traded digital bond—a 375 million Swiss franc-denominated three-year bond with a 2.33% coupon, which has the same instrument structure, legal status, and rating as a traditional UBS senior unsecured note.
UBS CEO Ralph Hamers, despite the company's active involvement in blockchain technology, has previously ruled out actively offering trading, custody, or lending services related to “alternative” crypto assets and referred to cryptocurrencies as an “untested asset category." According to InvestingPro Tips, there are more insights and tips available for UBS Group on InvestingPro, providing valuable information for potential investors.
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