For decades, its investment portfolio has revolved around a key academic idea that has not remained very well: efficient markets. There is a direct line of the theory of the efficient markets of the eugene fame in the 1960s until the theory of the modern portfolio. He paved the way for indices, a strategy that has not only resisted market cycles, but has also become the default value to administer pensions and retirement accounts.
As we advance in a new era of digital finance, tokenized assets can offer a way to expand our investment horizons so that traditional models have overlooked.
The genesis of modern portfolio theory
The investment of indexes did not arise by chance. At the beginning of the 1970s, in the midst of vigorous debates on market efficiency, Burton Malkiel’s seminal work that defends the indices in 1973 (in his book “A Random Walk Down Wall Street”) joined the launch of John Bogle of the Vanguard S&P 500 fund in 1975.
This consolidated a strategy that focused on wide diversification and minimum trade. Surprisingly, the investment of the passive index has triumphed worldwide, although the theory supports it, that investors are always rational, it has not remained well.
Behavioral psychologists such as Daniel Kahneman and Amos Tversky illuminated defects in our decision -making processes. This stands out in the award -winning book by Daniel Kahneman, “Thinking fast and slow.”
In the following decades, economists have reconciled efficient markets and irrational behavior in the concept of “quite good markets.” Wisdom added in the form of trends prices towards reason, over time, although day by day and case there are significant gaps that investors can exploit. The indices have remained well because exploiting these opportunities is difficult to do in a consistent or economical way.
At the same time, the regulatory framework governing institutional investment reinforces this dependence on proven strategies. Fund administrators operate under strict fiduciary duties that require them to prioritize customer interest and mitigate risk. As a result, they assign most of their portfolios to assets with long and established monitoring records, typically government bonds and passive capital funds.
In summary, the criteria for “acceptable” investments are not driven solely by possible yields; They are fundamentally linked to data history, reliability and transparency. In case you ask, that means index funds.
In this environment, venturing into unknown territory is not taken lightly. The new classes of assets, regardless of how promising, are initially marked because they lack the long -term daily data that make them viable for inclusion in a fiduciary portfolio. Until now, almost all portfolio theory has been based on American actions and government bonds. Although that universe has expanded over time to include indices and bonds of other large economies, it still represents only a relatively small portion of the assets of the world. The portfolios are limited at the intersection of regulations and data. And that will change everything.
Tokenization: expand the invertible asset universe
Tokenization and transactions in the chain not only offer a scalable way of packaging any type of asset. They also offer a route to transparent and comparable data on asset values. By representing real world assets, either Thai real estate, Nigerian oil leases or New York taxi medallions such as digital tokens in a block chain, we can begin to generate the type of daily data derived from the market that have traditionally been reserved for a narrow asset set.
Consider a simple question: how much should they appear in a diversified retirement portfolio in a diversified retirement portfolio? According to current models, the response is darkened due to the lack of reliable continuous price data. But if Thai real estate were tokenized, establishing a market in the chain with daily closing prices, it could eventually be measured with the same metrics used for US actions. Over time, this would force a reexamal of the static index -based approach that has dominated the investment strategy for so long.
Implications for global finances
At this time, alternative strategies, such as pension fund managers refer to anything other than an index of actions or a bond index, do not include more than 15-20% of most funds. Changing academic data on investment options would put the other 80% at stake.
Imagine a future in which a truly diversified portfolio is not limited by the limits of traditional capital and debt markets. With tokenization, investors of large institutional funds to individual savers could obtain exposure to classes of previously ignored geographical assets and regions due to data scarcity or illiquidity. The principles that support the modern portfolio theory would not be ruled out. Rather, they would be expanded to include a broader range of risk and return profiles.
As tokenized assets build stories, fiduciaries, which today favor the predictability of bonds and indices, could be forced to recalibrate their strategies. It is not that the quite good market hypothesis becomes obsolete. On the other hand, the parameters of what constitutes “efficient” can be expanded considerably. A richest data set could lead to better informed risk assessments and, ultimately, to portfolios that capture a more precise image of the global value.
A measured but inevitable change
This will not happen overnight. The fastest thing that we see that changes arise is approximately a decade, assuming time to build a wide portfolio of tokenized assets and 5-7 years to build a daily information history. However, once the data is present, the change could come quickly, thanks to the general use of artificial intelligence.
One thing that often slows the spread of change is the lack of intellectual bandwidth by fund managers and consumers to adapt to the new data. He took about 40 years to transfer pension fund investors of a 95%+ bond model in the 1950s to a majority capital index fund model in the 1990s. The index funds took about 30 years to become the dominant capital investment vehicle after the evidence showed that they were the best option.
In a world of automated investment tools driven by AI, the transition could happen much faster. And with hundreds of billion dollars in assets under administration, each percentage point change in the allocation strategy is a small change tsunami for itself. We will also organize a free session in the place that digital assets will have in the portfolios at the next Blockchain Global Ey summit, from April 1 to 3.
