Welcome back to Talking Tokens.
Was this forwarded to you? subscribe here.
What it means for a 117-Year-Old Asset Manager To Go “Fully Native”
Baillie Gifford has been managing money for over a century without taking on external shareholders, acquiring a company, or answering to anyone outside its own partners. Now, the firm is using that foundation to make what could prove one of its most forward-looking bets yet: a tokenized bond fund built on Solana and Ethereum that offers 7% interest and settles via USDC.
Theo Golden, head of digital assets at Baillie Gifford, has spent five years at the firm building toward that moment.
One of his earliest investment recommendations after joining the asset management firm, which manages over $237 billion, was to buy ether.
The firm’s internal tokenization work followed, through the FTX fiasco and subsequent crypto market turmoil. While others pulled back, Golden said Baillie Gifford deepened its conversations with the FCA, studied centralized lenders’ operational failures, and used the lessons to sharpen its own model.
"I love market distortion," Golden told me on StrataMedia's Talking Tokens podcast this week. "When you have high conviction in a technology, a theme, an idea, and the market has completely thrown the baby out with the bathwater, that's when I double down."
The tokenization structure that underpins the firm’s new bond fund, Baillie Gifford Enhanced Yield fund (BAGEY), was designed in that period for a client product that never went public.
Eventually, enough pieces fell into place for BAGEY to launch in late June.
The fund itself started as an Excel spreadsheet between Golden and his colleague Joseph Thorpe who’s a portfolio manager at the firm. The question they were asking was if they were to tokenize something, what would they actually want to own?
The conclusion they came to was a step out of cash with a compelling yield, limited credit risk, and short duration to avoid the volatility that's been rattling the long end of the rates curve, Golden shared. As a result, they thought short-term corporate and government bonds fit that bill and went for it.
At Baillie Gifford, if you’re going to tokenize something, it’s about offering “something better than they don't currently have today," Golden said.
A framing of “same, but better” is an internal hurdle that Baillie Gifford applies to everything it does in digital assets. Tokenization for its own sake doesn't move institutional allocators, so if it doesn’t change anything about the asset aside from bringing it onchain, there really isn’t a point to tokenizing it, he said.
What moves investors is a provably better version of something they already trust, whether that means lower operational risk, faster settlement, stronger auditability, or access to use cases that don't exist in the traditional system, Golden explained.
The choice to start with fixed income rather than equities was deliberate. Equities are an efficient market with mature access infrastructure, but
Fixed income, particularly risk assets rather than money market funds, are more operationally complex. Getting it right would make everything else easier, he said.
"We started with the hard thing first," he said, "which meant that everything from there was easier to do and had a much more plug-and-play operating model."
Early reception of the bond fund has been strong, Golden shared, attracting traditional investors, from pension funds and private banks to family offices. Pension funds in particular, often the slowest-moving institutions, are also seeing genuine value, he added. "We've maybe successfully made boring sexy again.”
Going forward, Golden doesn’t expect tokenization and institutional adoption to move in a straight line, but he believes that “tokenization has passed the credibility threshold.”
DISCLAIMER: Although our guest this week works at Baillie Gifford, nothing in this podcast or article should be considered an offer of its investment advisory services or should otherwise be confused for investment, tax, legal or other financial advice.
Check out the next section for more details and the full episode.
The latest Talking Tokens podcast 🎙️
For today’s episode, I interviewed Theo Golden, Head of Digital Assets at Baillie Gifford, to talk about BAGEY — the firm's newly launched tokenized bond fund on Solana and Ethereum that yields around 7% and settles in USDC.
Theo breaks down why he sees tokenization as an operating system upgrade rather than a reinvention of finance, how pension funds and private banks are already showing real interest in its new tokenized fund, and why he thinks AI democratizing insight and tokenization democratizing access are two themes that will collide into something nobody has fully figured out yet.
DISCLAIMER: Although our guest this week works at Baillie Gifford, nothing in this podcast should be considered an offer of its investment advisory services or should otherwise be confused for investment, tax, legal or other financial advice.
This episode is a part of the Solana Sessions campaign that Token Relations and the Talking Tokens podcast are doing, diving into founders' journeys and startups building on Solana. Check out the accompanying newsletter on www.token-relations.com
TIMESTAMPS:
00:00 His Journey to Digital Assets
03:33 From Journalism to Investment Theses
06:05 Learning from Successes and Failures
10:15 The Role of Independence in Baillie Gifford’s Innovation
15:19 Gradual Growth in Tokenization
20:57 Tokenization as an Operating System Upgrade
23:57 Convincing Clients of Tokenization's Value
24:50 Operational Leverage and Risk Management
27:12 The Origin of Baillie Gifford’s BAGEY Tokenized Fund
32:18 Initial Response and Market Interest
34:43 Choosing Solana and Ethereum for the Fund Launch
38:33 Solana and The Future of Internet Capital Markets
43:09 Trust and Adoption Among Institutional Investors
46:07 The Role of Traditional Institutions in Tokenization
47:59 AI and Tokenization: A Future Intersection
Talking Tokens episodes are released on Spotify and Apple Podcasts at 6AM EST or YouTube at 8AM EST every Tuesday and Thursday. Listen in!
Make sure to subscribe to keep up with the latest episodes. Feel free to leave a review and tell us your thoughts.
Get involved and share the newsletter. The more you refer, the more perks you could get. If you do (or don’t) like what you see, let me know by sending feedback to [email protected] or leaving a review on your preferred podcast platform.
This product is built by StrataMedia (The parent company to Token Relations, Talking Tokens & The Market Runup.)
Please note this content is for informational and educational purposes only. Any views shared should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research. We may have a direct or indirect financial interest in content mentioned in this newsletter.