As previously reported by finews.ch (article in German), Pictet Asset Management and SIX have completed a pilot project that could mark a turning point for the mutual fund industry. Instead of tokenizing an entire fund, the initiative focused on tokenizing and fractionalizing the underlying securities themselves — a first in the Swiss market. The approach aims to preserve the benefits of scale and diversification while giving investors far more say in how their portfolios are built.

The relevance goes beyond technology. By shifting the moment of fractionalization to the instrument level, the model opens the door to genuine customization at scale — something the traditional mutual fund structure cannot offer. The concept has already drawn interest from industry groups such as the Asset Management Association Switzerland, which is exploring it as the basis for a paradigm shift for asset managers possibly leading to a marketplace for fractionalized securities in the future.

In this interview, Olivier Monti, Senior Quantitative Analyst and Investment Manager at Pictet Asset Management, explains how the idea emerged, what made the pilot unique, and why the second phase — now involving AMAS and additional participants — could set a new industry standard.

Let’s start with the basics. This tokenization project — what was it all about?

The idea was really simple: to put investors back in the driving seat, giving them the possibility to express their preferences. Today, most investors use mutual funds. They are fantastic tools — they bring efficiency, scale, diversification. But there is one problem: it’s one single portfolio for everyone in the fund. When you invest, you get a fraction of that unique portfolio. The only choice you have is whether you like it or not. It’s a take-it-or-leave-it approach. With this project, we wanted to keep the benefits of a mutual fund strategy but give investors options — the possibility to opt in, opt out, and adjust certain elements.

And at first, it was meant for institutional clients?

Yes, the initial focus was on institutional clients. But just as retail investors have access to mutual funds today, you could imagine that once the solution is mature enough, nothing prevents it from being used by retail clients as well. They too can perfectly well express their preferences.

«With this project, we wanted to keep the benefits of a mutual fund strategy but give investors options — the possibility to opt in, opt out, and adjust certain elements.»

In your press release, you called the project «pioneering». With so many tokenization projects already out there, what’s new here?

Most people today are still talking about tokenizing the wrapper — the fund itself. If you do that, you can probably settle faster, distribute more easily — but it stops there. We took a different route: we tokenized the underlying securities. That changes the perspective completely. You still get the economies of scale, but you can deliver the product exactly as the client wants it. To make it happen, you tokenize an existing security — that’s nothing new — and then you fractionalize it. As far as I know, this was the first time it’s been done. You change the very nature of the instrument by breaking it into fractions. Phase one of the pilot proved the concept. Phase two will be about scaling and automation — thanks to smart contracts and a programmable ledger. That will let us automate bookkeeping and, more importantly, all the rebalancing, which is the really time-consuming part. Asset managers still focus on delivering the strategy — but the implementation and adaptation to client preferences are automated. That’s how you reach customization at scale.

How did you test it?

We had two institutional clients who believed in the project. This wasn’t just a proof-of-concept — it was a real investment. We bought two corporate bonds, one in Swiss francs and one in euros, and fractionalized them. These clients were exposed to those fractions and were happy to go ahead because they see this as the future of asset management.

Where did the idea come from?

It came from us, about four years ago. We asked ourselves: how could blockchain — or Distributed Ledger Technology (DLT) — disrupt the mutual fund industry? At first, like everybody else, we looked at tokenizing the wrapper. We ran a proof-of-concept. It worked — but when we stepped back, we saw that all we’d done was adding another layer of cost on top of the existing structure. We hadn’t really solved anything. So we went back to the fundamentals: the mutual fund exists to pool money from many investors so they can get diversification and scale — things they couldn’t access alone. It works extremely well, but it doesn’t allow investors to express preferences. What we did was simply move the point where fractionalization happens. In a fund, it’s after the portfolio is built. We moved it to before — at the instrument level. That very small change opens up a whole new world.

«We asked ourselves: how could blockchain — or DLT — disrupt the mutual fund industry?»

And the next steps?

The work we’ve done is now part of a working group at the Asset Management Association Switzerland (AMAS). The idea is to create a standard and, eventually, a marketplace for fractions — making them easier to buy and sell, and adding a liquidity layer similar to ETFs. For that, you need participants, and AMAS is the right partner to bring them in. They’ve taken this on as one of their projects, with a first customizable portfolio targeted for the end of 2026.

Will the second phase still just involve Pictet and SDX?

No, phase two will be with AMAS and other participants — we want to reach critical mass and set a new industry standard.

And the pilot clients?

Very satisfied. Everything worked as planned. They want phase two as soon as possible, and we’ll work closely with them to make sure it meets their needs.

Olivier Monti, CFA, is Senior Quantitative Analyst and Investment Manager at Pictet Asset Management, where he has worked since 2005. Based in Geneva, he specializes in multi-asset strategies, risk premia extraction, and tactical asset allocation, combining quantitative research with hands-on portfolio management.