Aviva Investors launched a tokenized share class of its £22 billion Sterling Liquidity Fund on the XRP Ledger on October 26. The asset manager committed £50 million to the offering, extending its Ripple partnership after introducing a dollar-denominated tokenized fund in July.
The new share class allows eligible investors to access the fund via digital wallets. Aviva claimed that its two tokenized products had assets under management worth over £86 million, thus making it one of the bigger tokenized money market funds in Europe.
The amount of £22 billion relates to the whole fund and not to the blockchain-based share class. The October press release did not mention any amount related to the investment from outside investors in this new product.
How Does the XRP Ledger Share Class Work?
This fund works using the digital twin model. The ownership will be shown on the XRP ledger, while the investments and the current fund structure will stay off-chain.
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Tokenized fund shares will be issued to investors instead of debt securities that currently make up the portfolio. Aviva said the investment objective, risk profile, liquidity conditions, and regulatory protections were unchanged.
The Sterling Liquidity Fund was created in 2002 and is located in Ireland. This is a UCITS money market fund, which invests in short-term high-grade sterling debt securities.
Why Did Aviva Expand Its Ripple Partnership?
Aviva and Ripple made the announcement of their partnership back in February. The purpose of the deal was to tokenize existing investment funds without changing their portfolio structure.
Back in July, the firm issued a tokenized share class for its US Dollar Liquidity Fund. This was the first tokenized fund from the company and used the same technology and custodianship providers.
The sterling launch builds on this by bringing the tokenization to another currency. The company invested £50 million in the new share class and stated that investments in both share classes now stand at more than £86 million.
Mark Versey, CEO of the firm, noted that the company views tokenization as a tool for increasing efficiencies and delivering better results to clients. The CEO also commented that the partnership with Ripple will continue.
Who Holds the Assets Behind the Digital Shares?
BNY Mellon manages the underlying assets of the Sterling Liquidity Fund. The XRP Ledger is responsible for the digital representation of share ownership rather than custody of the short-term bonds held by the fund.
Komainu offers regulated institutional digital asset custody services. Licuido provides the technology necessary for issuing and managing tokenized shares in accordance with the press release from the companies.
The same companies backed the launch of Aviva’s dollar-fund in July, which was approved by the Central Bank of Ireland for its tokenized share class.
Ripple made investments in Licuido and fund technology company ZILO in August. According to the press release from the company, these investments facilitate issuance, transfer agency, and tokenized asset movements within the financial services industry.
What Changes for Investors and Fund Operations?
According to Aviva, the XRP Ledger will be able to deliver rapid and inexpensive transactions during the issuance and service of digital fund shares. These features relate to the transaction layer and have nothing to do with the investment policy of the Sterling Liquidity Fund.
According to Nigel Khakoo from Ripple, there was a demand for non-stop trading in the market and more rapid settlements. However, the October statement made no promises about unrestricted trading or immediate cash withdrawal for this share class.
Tokenization does not mean that investments become risk-free. Instruments used in money markets may vary in price, and investors may lose part of their initial investment.
The introduction of the XRP Ledger means one additional way of accessing an existing fund. Aviva has already announced two share classes that will be tokenized, but the company has not yet revealed its plans concerning future launches.
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