In the evolving landscape of financial markets, private equity and private credit have emerged as powerful investment vehicles, managing over $13 trillion globally. Yet, despite this impressive footprint, these markets continue to operate within traditional frameworks characterised by limited access, illiquidity and operational inefficiencies. Enter tokenisation, a technological breakthrough that promises to transform how private markets function by creating digital representations of real-world assets on blockchain networks. Private credit has been one of the financial system's fastest-growing segments over the past 15 years, expanding nearly tenfold since 2009 to reach approximately $2 trillion by the end of 2023. And whilst this represents just a fraction of the broader fixed-income landscape, analysis suggests the addressable market for private credit could exceed $30 trillion in the US alone. Meanwhile, the private equity ecosystem demonstrates remarkable breadth compared to public markets. There are approximately 215,000 companies with either private equity or venture capital backing compared to more than 58,800 public companies. Yet, private equity and venture capital assets under management total just over $11 trillion, representing only about 12% of public equity markets' $87 trillion capitalisation.
A selection of some of the biggest private equity and private credit managers globally
Source: Teamblockchain
Institutional investors are increasingly bullish on the long-term performance potential of private markets. A survey of 500 institutional investors revealed that, whilst only 46% expected private assets to outperform public assets over a one-year horizon, a striking 73% believed private markets would deliver superior returns over five years. And this confidence varies by investor type and size - corporate pension schemes showed greater optimism in the short term whilst financial institutions demonstrated the highest confidence (80%) in private markets' outperformance over five years; smaller investors (managing less than $5 billion) were generally less optimistic about private markets' long-term prospects; equity-based private market assets are particularly favoured for their long-term potential; real estate equity, private equity and infrastructure equity were identified as the top three private market asset classes expected to deliver the strongest risk-adjusted returns over three to five years; and larger institutions (with over $20 billion in assets) showed particular enthusiasm for private equity (62%) and infrastructure equity (59%), whilst DC schemes (66%) and public pensions (65%) favoured real estate equity.
However, despite their significant growth and increasing appeal, private markets are hindered by several inefficiencies that restrict their full potential. One of the most notable challenges is the limited liquidity these markets offer; investors are often required to endure multi-year lock-up periods, with few opportunities to access secondary markets which can be frustrating for those seeking flexibility and quicker returns. Alongside this, the operational complexity inherent in private markets further exacerbates inefficiencies. Activities such as capital calls, net asset value (NAV) tracking, waterfall calculations and adherence to regulatory compliance demand substantial manual effort whereby leading to delays and increased risk of errors. In addition to operational complexity, transparency remains a major issue within private markets. Investors often struggle with a lack of visibility into the underlying assets and the flow of transactions, which can lead to uncertainty and hesitation when making investment decisions - furthermore, this opacity is compounded by the high barriers to entry that characterise the space. Historically, private equity and credit have been the domain of institutional investors and ultra-high-net-worth individuals, leaving smaller investors excluded from the market. In addition, the administrative costs involved in managing private market investments are another significant hurdle; the need for complex documentation, compliance with various regulations and intermediary fees all contribute to a high overhead, further diminishing the attractiveness of these markets. Together, these inefficiencies present considerable obstacles to the growth and optimisation of private markets but tokenisation, the process of issuing blockchain-based representations of real-world assets, offers compelling solutions to these longstanding challenges, including:· enhanced operational efficiency through programmability - smart contracts deployed on blockchain networks can automate complex operational workflows that currently require significant manual intervention. Companies such as Taurus Securitize and Tokeny have demonstrated how tokenisation can embed rules for issuance, distribution and compliance directly into digital securities, reducing administrative costs and shortening settlement times from weeks to minutes.
· unlocking liquidity in traditionally illiquid market - one of tokenisation's most significant benefits is its potential to introduce liquidity to historically illiquid assets. By enabling fractional ownership and establishing regulated secondary trading venues, tokenisation creates pathways to liquidity previously unavailable in private markets. Regulated marketplaces such as Archax (UK FCA-regulated) and INX (US-regulated) are establishing compliant environments where tokenised private assets can be traded. This development could fundamentally alter how investors approach allocation to private markets, potentially removing the liquidity premium that has long characterised these investments.
· enhanced compliance and transparency - regulatory compliance represents a substantial cost centre for private market participants. Blockchain technology enables embedded compliance mechanisms, real-time audit trails and secure digital identities that can streamline these processes while maintaining regulatory standards. Solutions from companies such as Civic, KILT Protocol and analytics platforms (such as Chainalysis) provide identity verification and transaction monitoring that align with regulatory requirements whilst reducing the friction of traditional onboarding and reporting systems.
· democratising access to private markets - perhaps the most transformative aspect of tokenisation is its potential to democratise access to private markets. By enabling fractional ownership and digital distribution, fund managers can broaden their investor base whilst still complying with jurisdictional requirements. BlackRock CEO, Larry Fink, has highlighted this democratisation potential, noting that tokenisation enables fractionalisation, lowering barriers to entry and allowing even relatively wealthy individuals to better diversify their investments across private market opportunities. Fink envisions a shift from the traditional 60:40 split between stocks and bonds toward a 50:30:20 allocation (stocks, bonds and private assets) with tokenisation playing a key role in making the 20% private asset allocation accessible to a broader range of investors.
· institutional momentum and implementation - major financial institutions are actively exploring tokenisation's potential. BlackRock recently tokenised its first fund on Ethereum using Securitize, whilst JPMorgan's Onyx has been piloting tokenised deposits and exploring institutional DeFi applications. Industry consortiums such as Project Guardian (led by the Monetary Authority of Singapore) and Project Helvetia (led by the BIS and Swiss National Bank) reflect growing global momentum toward integrating tokenisation into traditional finance.
Furthermore, regulatory clarity plays a crucial role in the widespread adoption of tokenisation and significant progress is being made to establish a viable framework for its integration. In the European Union, the introduction of the Markets in Crypto-Assets Regulation (MiCA) provides a solid foundation for the regulation of stablecoins and tokenised securities. This regulation helps set clear guidelines whereby enhancing confidence in the market and paving the way for broader adoption. Meanwhile, in the UK, the Digital Securities Sandbox offers a unique opportunity for real-world testing under modified regulatory conditions, allowing firms to innovate and experiment whilst remaining within a supportive regulatory environment. Across the Atlantic in the US, businesses are actively working with the SEC and FINRA to structure blockchain-based offerings that comply with existing regulations, further legitimising the role of blockchain in financial markets. Hence, as these regulatory initiatives continue to evolve and align, the prospect of tokenisation in private markets becomes increasingly feasible. And with clearer legal frameworks in place, market participants can now explore tokenisation with more certainty, reducing the risks associated with regulatory ambiguity and helping to foster broader adoption within the financial ecosystem.
Tokenisation is certainly more than merely a trend; it is a fundamental infrastructure upgrade for private markets. By introducing speed, transparency, fractional ownership and lower costs, it has the potential to enhance private markets without disrupting their core structures. For investors, tokenisation offers easier access to previously exclusive opportunities, better portfolio diversification and enhanced liquidity for traditionally illiquid investments. Additionally, operational efficiencies may lead to lower fees, so improving the overall investment experience. For fund managers and issuers, tokenisation provides access to a broader capital base, reduces administrative costs and streamlines compliance processes. It also opens the door for creating innovative investment products, further shaping the future of private markets. However, as tokenisation gains momentum, market participants must consider several key factors to ensure they stay ahead. Strategic positioning will be crucial, as early adopters have the opportunity to define industry standards and gain a competitive edge in attracting capital and talent. Technology integration should also be a priority with organisations needing to evaluate blockchain platforms, tokenisation service providers and necessary infrastructure updates to stay on the cutting edge. Regulatory navigation will also be vital, as engagement with regulators and industry associations becomes increasingly important as regulatory frameworks continue to evolve. Finally, investor education is essential for broader adoption - helping investors understand the mechanics, benefits and risks associated with tokenised private market assets will ensure they are well-equipped to participate in this emerging space.
In addition, as the global financial system becomes increasingly digital, tokenisation represents an inevitable evolution for private markets. The question for private equity and credit players is no longer if they will participate in this transformation, but when and how they will make the transition. Whilst challenges remain, including technological integration hurdles, regulatory uncertainties and market education needs, the trajectory is clear: tokenisation is poised to make private markets more efficient, transparent and accessible. Those who recognise and adapt to this shift early will be well-positioned to thrive in the next generation of private markets - one that maintains the value proposition of private investments whilst addressing many of their historical limitations through technological innovation.
For investors and asset managers alike, understanding and preparing for this transformation will be essential to capturing the opportunities that lie ahead in the evolving landscape of private market investments.
This article first appeared in Digital Bytes (11th of June, 2025), a weekly newsletter by Jonny Fry of Team Blockchain.