Hong Kong took another step in adopting asset tokenization by approving the first fully tokenized fund issued natively on blockchain. The authorization was granted by the Securities and Futures Commission (SFC) to Baillie Gifford's Enhanced Yield Fund, intended exclusively for professional investors.
The Baillie Gifford Enhanced Yield Fund (BAGEY) is an actively managed fixed-income fund. Its portfolio brings together short-term government and corporate bonds, seeking to combine yield with greater operational efficiency.
The main differentiator lies in the product's structure. Instead of merely representing shares in digital format, the fund was issued directly on the Ethereum and Solana networks.
In this model, the blockchain serves as the official record of investors' ownership. The proposal eliminates intermediary steps and simplifies the administration of the shares.
The infrastructure was developed in partnership with BNY, responsible for tokenization services and digital wallets. NatWest Trustee and Depositary Services will act as the fund's custodian.
Qualified investors will be able to subscribe and redeem using fiat currency or USDC. The product also allows T+0 redemptions of up to 10% of net asset value (NAV).
In addition, the fund provides an indicative NAV for trading in the secondary market. This feature seeks to facilitate the pricing of shares throughout the day.
According to Baillie Gifford, tokenization can make investment infrastructure more efficient. The company highlights benefits such as direct ownership on blockchain, greater transparency, and simpler operational processes, without giving up regulatory requirements.
“Tokenization will only make a difference if it makes finance fundamentally better,” commented Theo Golden, head of digital assets and tokenization at Baillie Gifford. “Most tokenized funds create a digital structure around existing funds; BAGEY is different. Investors hold the fund directly on the blockchain, creating a simpler ownership model for increasingly digital financial markets.”
The asset manager believes that the authorization also reinforces Hong Kong's strategy to expand its participation in the tokenized asset market. The expectation is that products of this type will offer faster settlement, greater transparency, and a more efficient ownership structure.
“Our ambition is not tokenization for tokenization’s sake, but rather to build an investment infrastructure that clients can trust—with more transparent ownership, more robust governance, and faster settlement. The same discipline, but with better infrastructure,” added Theo Golden.
The fund follows the OEIC model regulated in the United Kingdom. It currently maintains a portfolio with an approximate yield of 7%, an average credit rating of BBB, and a duration of about two years.
The initiative combines traditional fixed-income characteristics with blockchain-based infrastructure. The objective is to bring regulated products closer to tokenization technology while preserving the standards required by the financial market.