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Vaults could open new distribution channels for asset managers, connecting their products with on-chain investors and strategies. Realising that opportunity, however, requires more than technical integration. Institutions need clarity on investment governance, investor suitability and redemption arrangements before they can assess how a vault fits their distribution model.
These questions framed Beyond the Wrapper: How Asset Managers Build an Onchain Franchise at Vault Summit Singapore. Featuring Wayne Hsu, Executive Vice President of KGI Financial, and moderated by Henry Zhang, Founder and Group CEO of DigiFT, the fireside brought an institutional issuer’s perspective to the evolving role of vaults in asset management.
For vault builders, it offered a valuable lens: what would make an established asset manager consider vaults a credible route to investors?
The discussion explored both the potential of programmable investment strategies and the requirements for institutional participation. Clear responsibilities, appropriate investor access and withdrawal terms aligned with underlying liquidity are central to that assessment. For builders seeking to attract institutional issuers, these considerations are integral to the product and distribution proposition.
The following takeaways are presented without attribution under the Chatham House Rule.
The fireside in 30 seconds
- A distribution channel needs a clear purpose. Vaults become relevant when they address an investor need or extend access to an asset manager’s offering.
- Programmable controls need accountable governance. Institutions must understand who sets investment limits, who can amend them and who oversees the strategy.
- Investor access must reflect suitability. Product availability alone does not establish whether an allocation fits an investor’s mandate or requirements.
- Withdrawal terms must reflect underlying liquidity. On-chain transferability does not, by itself, create liquidity in the assets held.
1. Establish the distribution case
For an asset manager, a new channel needs to serve an identifiable investor need. That might mean reaching on-chain investors seeking exposure to markets or strategies they cannot readily access through existing platforms. The distribution case rests on understanding that audience and how the offering would meet its needs. For vault builders, demonstrating technical capability is therefore only part of the proposition. An issuer also needs to understand the value of making its product available through the channel.
2. Make governance as clear as the investment rules
A vault can encode limits on leverage, concentration or rebalancing, making aspects of a strategy more transparent and easier to monitor. Institutional oversight still requires clarity on who defines those limits, who has authority to amend them and who is responsible when the strategy departs from its mandate. The ability to inspect code does not settle those questions. Builders need to explain how programmable controls operate within an accountable governance structure, including the scope for human intervention.
3. Design access around institutional requirements
An asset manager must consider both the intended investor base and the conditions under which its products can be distributed. Broader technical access does not remove suitability requirements. For institutional investors, mandates, capital treatment and accounting requirements may also determine whether an allocation is feasible. These considerations influence the design of the channel itself, including how investors subscribe to and hold the product. Addressing them early gives issuers a clearer basis for assessing whether a vault can support their distribution objectives.
4. Align redemption expectations with underlying liquidity
The ability to transfer a token on-chain does not necessarily mean an investor can sell it or redeem the underlying investment when needed. Transfers, secondary sales and redemptions rely on different arrangements. Where the underlying portfolio operates within market hours or scheduled redemption windows, the vault’s withdrawal terms need to reflect those constraints. Asset managers and builders should be able to explain how withdrawals are funded, what depends on available market liquidity and which conditions could delay settlement. Those distinctions matter when investors assess whether the product meets their liquidity needs.
What this means for vault builders
For vaults to become a credible distribution route, asset managers need to see how the channel serves investors and fits their governance and operating requirements. The practical opportunity for builders is to make that assessment easier: establish the investor need, define responsibilities and explain the liquidity arrangements. These are core elements of the proposition an issuer must evaluate before committing products, resources and its institutional reputation to a new channel.
INSTITUTIONAL ALLOCATOR GUIDE
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