Let’s discuss the integration of digital assets and tokenised instruments into mainstream portfolios, what’s front of mind for the buy-side?
At Prescient, we approach digital assets and tokenisation through a practical, data-driven lens: does this improve capital efficiency, execution quality and portfolio transparency?
In theory, digital rails offer faster settlement – moving from T+2 toward near real-time – as well as simultaneous exchange of cash and securities without settlement lag. That could reduce counterparty exposure and improve capital usage. But those benefits only matter if they integrate seamlessly with existing custody, clearing and regulatory frameworks.
Digital instruments must align with portfolio systems, custodians, administrators and reporting requirements. If post-trade infrastructure is not aligned, complexity increases rather than decreases.
As we explore how a fund structure might operate on digital rails, we are working through practical questions: how settlement interacts with existing clearing models, how custodians reflect holdings, and how to ensure credible market makers and liquidity providers support secondary trading.
From an exchange perspective, we see blockchain less as disruption and more as infrastructure modernisation. Exchanges such as the JSE are likely to embed distributed ledger efficiencies into established frameworks – enhancing settlement and compliance while preserving regulatory oversight and market integrity. Adoption will follow alignment.
Which roadblocks could appear when it comes to that integration?
The constraints are structural rather than technological. Traditional exchanges operate within central securities depositories and clearing houses that provide legal certainty and defined counterparty protections. If digital settlement models do not integrate with those systems, the theoretical advantages of faster settlement cannot be fully realised.
Liquidity formation is equally critical. For any instrument to function at institutional scale, there must be participants willing to continuously quote two-way prices and commit balance sheet. Liquidity providers and market makers absorb order flow, tighten spreads and facilitate execution without excessive price impact. Without them, bid-offer spreads widen, price discovery weakens and institutional trade sizes become difficult to execute efficiently.
In tokenised markets, this challenge is amplified. Liquidity is often fragmented across multiple venues, and market-making capital may be limited or opportunistic rather than structural. In environments that include exchanges, alternative trading systems and crypto-native platforms such as Luno, liquidity can disperse rather than consolidate – complicating best execution and increasing transaction costs.
Regulatory clarity remains foundational. Asset segregation, venue oversight and settlement finality must meet the same standards as traditional markets.
In our experience, innovation scales when regulation, infrastructure and committed liquidity provision evolve together. Without that alignment, efficiency remains theoretical.
Your panel unpacks evolving client mandates – how are shifts in alpha expectations, ESG integration and passive vs active investing changing buy-side strategy?
We are seeing mandates become more structurally engineered and more outcome-focused.
Globally, portfolio construction is increasingly taking on a barbell shape: highly liquid ETF exposure on one end, and private markets or alternative assets on the other. While this trend is more developed offshore than in South Africa, it reflects a broader objective – combining scalable, low-cost beta with differentiated sources of return that are less correlated to public markets.
ETFs have evolved into core portfolio building blocks. They provide intraday liquidity, efficient balance sheet usage and flexible tactical allocation. For trading desks, this shifts attention toward secondary market liquidity, authorised participant activity and creation/redemption dynamics.
Actively managed ETFs are also gaining traction globally. They combine active portfolio construction with exchange-based access and transparency, reshaping distribution economics and increasing real-time pricing scrutiny.
This environment strengthens the case for portable alpha and enhanced indexation. Separating beta from alpha – holding low-cost index exposure while overlaying systematic, data-driven return streams – can deliver more efficient return enhancement than traditional high-fee active mandates.
Strategically, we are balancing liquidity, access and differentiated alpha. Execution capability, risk discipline and data infrastructure are central to delivering consistent outcomes.