The global asset management industry and technology are inextricably bound together. Innovation has always shaped the future of asset management. Today, we are on the cusp of innovations that will revolutionize investment management in ways that serve all investors.

Since the mid-1980s, powerful advances in computing and information technology have driven significant innovations in asset management. These include the adoption of modern portfolio theory, the explosion of derivative products, the adoption of passive strategies, and the reduction of operations costs. These innovations delivered robust portfolios to the investment public at significantly lower cost.

Today, two emerging innovations hold promise to further revolutionize the asset management industry: digital finance and artificial intelligence.

Within digital finance, the key innovation has been the blockchain, which offers a decentralized system for storing and exchanging digital assets. Blockchain technology has enabled the rapid introduction of cryptocurrencies, but its greatest promise lies in the transformations it will enable in the securitization of previously unmarketable assets via tokenization.

We are on the cusp of innovations that will revolutionize investment management and serve all investors.

Tokenization will become the next big innovation in portfolio management. For investors, tokenized assets offer new sources of return, more diversified from those in public equity or fixed-income markets. Tokenization will create assets complementary to stocks, bonds, and other holdings, enabling more robust portfolio construction tailored to investor objectives.

Tokenization also offers issuers ways to raise equity capital from assets that have typically been illiquid. For example, intellectual property—such as artist royalties, copyright earnings, and scarcity values—has already begun to be transformed into tradable tokens. In the future, commercial and residential real estate, along with other tangible assets, could also be tokenized to unlock liquidity by transferring ownership rights or revenue streams to investors.

The potential size of tokenized assets is significant. For example, the total equity value of US residential real estate is nearly $35 trillion, more than the size of the US Treasury market of $26.5 trillion and about 72 percent of the market capitalization of the S&P 500 Index (of $48.7 trillion).

The second significant innovation for asset management resides in the application of artificial intelligence (AI). AI has the potential to transform all aspects of asset and wealth management, especially the client experience. AI will equip client advisors with tools to deliver customized solutions.

Over much of the history of asset management, client outcomes have been defined in terms of investment returns. And in more recent decades, attention has focused on generating “alpha,” i.e., returns beyond those delivered by the broad market.

Yet the singular focus on delivering “alpha” often reflects a parochial and finance-centric view of what can be readily measured. That does not always correspond to the needs of clients.

Artificial intelligence can revolutionize the client experience. It promises to shift the relationship between client and asset manager toward an even more highly personalized one. AI can dynamically adjust client portfolios to their changing objectives for income, capital appreciation, or liquidity. Life events can be addressed in a bespoke fashion for each investor by advisors using AI. For the asset manager, the economic benefits are significant, as a fixed cost for AI can be deployed across an unlimited number of client portfolios.

Importantly, AI serves clients best alongside their trusted advisors. Human interface, and the trust it generates, remains essential for the financial services industry. AI augments the ability of client advisors to perform their fiduciary responsibilities directly with investors.

In sum, innovation is a crucial element of productivity, which ultimately determines living standards. Humans are innately creative and ingenious.

The asset and wealth management industries have been transformed over the past half-century by rapid innovation. Today, many industries are on the verge of another wave of innovation, led by digital finance and artificial intelligence. Those innovations are arriving at great speed and worldwide. They will transform asset management.

The potential benefits of these innovations are enormous. They will transform investing by offering new products, enabling investors to achieve more diversified and rewarding outcomes. They will enable asset owners to unlock equity and liquidity in their holdings. They will allow fiduciaries to dynamically adjust portfolios to meet the changing needs and preferences of their clients.