Source: Wall Street Legend on the Future of Finance

Compiled & Edited by: lenaxin, ChianCatcher

Since the beginning of the year, several traditional institutions, including Hong Kong Asia Holdings, Australia's Monochrome, BlackRock, Fidelity, Bitwise, ARK Invest, Japan's Metaplanet, Value Creation, Palau Technology Co., Ltd., Brazil's Meliuz, Franklin Templeton, U.S. stock Dominari Holdings, asset management company Calamos, and game retailer GameStop, have begun to position themselves in Bitcoin. They are accelerating their allocation to crypto assets through various forms such as fundraising investments, ETF increases, bond financing, and corporate reserves.

This article features a video interview of Anthony Pompliano with Erik Hirsch, Co-CEO of Hamilton Lane, focusing on the following three core topics:

• Why is this traditional financial giant with a 50-year history accelerating its layout in the blockchain sector?
• How does it achieve a dynamic balance between technological innovation breakthroughs and stringent regulatory compliance?
• What is the underlying strategic logic behind the massive investment in creating tokenized funds?

Hamilton Lane is a leading global private market investment management company, founded in 1991 and headquartered in the United States, managing nearly a trillion dollars in assets. The company focuses on alternative asset investments such as private equity, credit, and real estate, providing full-cycle asset allocation solutions for institutional investors (such as sovereign wealth funds, pension funds, insurance companies, etc.). In recent years, Hamilton Lane has actively positioned itself in the blockchain and asset tokenization fields, driving liquidity transformation in the private market and promoting inclusive finance through technological innovation, becoming one of the representative institutions of traditional finance's digital transformation.

As the leader of a global private equity investment giant managing nearly a trillion dollars in assets and employing over 800 people, Erik Hirsch has been deeply involved in asset allocation and innovative investment for over twenty years, and his unique insights are highly regarded in the industry. Mr. Erik Hirsch's strategic choices effectively drop a deep-water bomb on the entire traditional financial system. When the rule-makers of the industry actively embrace disruptive innovation, what kind of historic turning point does this cognitive paradigm shift signify? The industry transformation landscape behind it is worth our in-depth analysis together.

Key Points from Erik:

• I believe we have no choice; the trend of digital assets continuing to spread globally is difficult to reverse.
• The complexity of the current market environment has surpassed the conventional realm of uncertainty, presenting characteristics of continuous dynamic evolution in multi-dimensional market fluctuations.
• From the perspective of the evolution of asset allocation theory, the historical limitations of the traditional "60/40 stock-bond allocation model" have become fully apparent.
• The private capital sector has particularly exposed a tightening liquidity situation: the scale of financing in the primary market has shown historic contraction.
• The logic of capital allocation is undergoing a fundamental transformation: investors will bear the cost of liquidity premiums to obtain diversified returns across asset classes. This trend is not a cyclical adjustment but a paradigm shift driven by changes in the market microstructure.
• The tariff variables under the framework of geopolitical economic games still exhibit significant uncertainty in their policy impact parameters and time dimensions, leading to pressure on the asset valuation system for paradigm reconstruction.
• Although the risk hedging paths of gold and Bitcoin investors belong to different value systems, their allocation motivations show a high degree of underlying logical convergence.
• Current tokenization technology is more suitable for scenarios with perpetual characteristics.
• I fully agree that we should abandon the traditional binary classification framework.
• Tokenization is essentially a digital rights confirmation tool for assets, and its compliance framework is no different from traditional securities-type assets.
• Whether tokenization technology can trigger a paradigm revolution in the private fund industry depends on whether capital truly recognizes the value proposition of this liquidity reconstruction.
• We are more inclined to maximize the application boundaries of tokenization in our strategic choices, continuously deepening product innovation and promoting investor education.
• As the market evolves towards perpetual mechanisms, tokenization technology will significantly optimize trading efficiency.
• Financial history repeatedly confirms: any innovation with customer cost advantages will eventually break through institutional inertia.

Strategic Layout to Address Global Uncertainty: A Breakthrough Path from an Authoritative Perspective

Anthony Pompliano: In the macro paradigm characterized by nonlinear fluctuations in the global economy and investment field, as an institutional decision-maker managing nearly a trillion dollars in assets with multi-regional resource allocation capabilities, how do you systematically construct a strategic decision-making framework to respond to the structural changes in the market environment? Especially in the deepening advancement of cross-border resource allocation and the continuous expansion of the investment landscape, how do you achieve a dynamic balance between maintaining strategic stability and tactical dynamic adjustment?

Erik Hirsch: The complexity of the current market environment has surpassed the conventional realm of uncertainty, presenting characteristics of continuous dynamic evolution in multi-dimensional market fluctuations. This systemic volatility has created a solving dilemma among variables akin to an over-determined equation, breaking through the analytical boundaries of traditional quantitative models. Observing the flow of institutional funds, it is evident that most leading investors are adopting a strategic defensive posture, compressing risk exposure to await the clarification of the market's long and short game equilibrium point.

The private capital sector has particularly exposed a tightening liquidity situation: the scale of financing in the primary market has shown historic contraction, the process of corporate mergers and acquisitions has entered a phase of stagnation, and all parties involved in transactions are generally in a reassessment cycle of systemic risk margins. Under the framework of geopolitical economic games, the tariff variables still exhibit significant uncertainty in their policy impact parameters and time dimensions, leading to pressure on the asset valuation system for paradigm reconstruction.

Anthony Pompliano: The current pressure in the capital market has surpassed the simple dimension of value correction, with the pricing mechanism and liquidity transmission system showing deep coupling characteristics. In this special phase where the market friction coefficient has broken through the critical value, the systematic enhancement of the risk-averse effect has triggered a structural gathering of funds towards cash-like assets, causing the correlation coefficients across asset classes to approach a completely positive correlation threshold.

Regarding the significant increase in the allocation weight of private equity by institutional investors in recent years, its trend sustainability faces dual testing: will the pressure for this allocation weight adjustment stem from the market's repricing of the liquidity discount of private assets, or from the institutional investors' ability to fulfill long-term commitments based on cross-cycle allocation concepts? It is particularly noteworthy: when the volatility cycle parameters break through the traditional model's ten-year confidence interval, does the duration mismatch risk hedging mechanism under the "cross-cycle" investment philosophy still possess theoretical coherence?

Erik Hirsch: From the perspective of the evolution of asset allocation theory, the historical limitations of the traditional "60/40 stock-bond allocation model" have become fully apparent. This model, as a benchmark paradigm in the retirement savings field, has a theoretical core that combines 60% equity assets with 40% fixed income assets, which is essentially a path-dependent product of a specific historical cycle. Even if we strip away the geopolitical friction variables, the applicability of this model in today's market environment still faces dual challenges: the continuous rise in public market volatility parameters and the unprecedented concentration characteristics of the market.

It is particularly noteworthy that the current phenomenon where the top seven constituent stocks dominate the market structure (the top seven constituent stocks of the S&P 500 account for 29%) did not exist in the market structure 15-20 years ago. Historical examination shows that while there were industry concentration issues at that time, there were no extreme scenarios where the volatility of individual constituent stocks could trigger systemic risk transmission. This oligopolistic market structure fundamentally conflicts with the core idea of the 60/40 model, which is based on passive tracking strategies and the principle of minimizing fees, while the current market microstructure increasingly reveals the structural defects of passive investment strategies.

Based on this, the logic of capital allocation is undergoing a fundamental transformation: investors will bear the cost of liquidity premiums to obtain diversified returns across asset classes. This trend is not a cyclical adjustment but a paradigm shift driven by changes in the market microstructure.

Anthony Pompliano: When you start each trading day in a market environment full of uncertainty, how do you determine the direction of your decisions? Specifically, how do you construct the core data indicators you focus on daily to guide your investment direction?

Erik Hirsch: In the systematic integration of global information flow at five o'clock every morning, the current market environment presents characteristics of paradigm transformation: the pricing weight of news cycles has surpassed traditional macroeconomic indicators. The decision-making focus is concentrated on three non-traditional variables: the release of significant geopolitical declarations, substantial restructuring of international relations frameworks, and the risk of escalation in sudden conflicts. These factors are reconstructing the generation mechanism of market volatility.

Viewing the market system as a nonlinear dynamic system, its operational characteristics resemble a turbulent river: investors cannot intervene in the flow rate parameters, nor can they change the distribution of obstacles in the riverbed. The core function of institutions is to optimize dynamic paths, achieving systematic risk avoidance through risk premium compensation mechanisms. Therefore, news cycle analysis constitutes the first principle of the decision-making framework.

The second dimension focuses on micro behavioral trajectories: based on the U.S. consumption-driven economic model, it is necessary to construct a real-time monitoring system for high-frequency consumption behavior indicators (such as dining frequency, air passenger index, cultural and entertainment service expenditures). These behavioral data constitute the a priori fluctuation factors of the consumer confidence index.

The third dimension analyzes the signal network on the corporate side: focusing on tracking the asymmetric fluctuations of industry confidence indices, the marginal contraction of fixed asset investments, and the structural differentiation of profit quality. The above indicators form a multi-factor verification system for the economic fundamentals. Only through the orthogonal verification of consumer and corporate data can we penetrate the noise interference of the market microstructure and form a robust decision-making basis.

Reconstructing the Risk Hedging Logic of Bitcoin and Gold

Anthony Pompliano: The price of gold has recently surpassed historical highs, and this asset class has achieved its best historical return curve in 2023, continuing to maintain strong momentum into 2024. Traditional analytical frameworks attribute the driving factors to the combined effects of central bank balance sheet structural adjustments (gold purchasing behavior) and the demand for uncertainty premium compensation. However, it is noteworthy that Bitcoin, endowed with the attribute of "digital gold," is also exhibiting excess return characteristics. These two asset classes have shown significant negative correlation over the past decade but are currently constructing an asymmetric hedging combination during the rising macro volatility cycle.

It is particularly noteworthy: although your institution's investment portfolio is centered on illiquid assets, Bitcoin and gold, as high liquidity targets, still possess special research value. When evaluating strategic asset allocation models, do the pricing signals of such heterogeneous assets possess decision-making effectiveness? Specifically: does the trajectory of changes in central bank gold reserves imply expectations for the reset of global currency anchors? Does the abnormal movement of Bitcoin's implied volatility parameters reflect a structural shift in the market risk premium compensation mechanism? These non-traditional data dimensions are deconstructing and reconstructing the decision boundaries of classic asset allocation theory.

Erik Hirsch: Although the risk hedging paths of gold and Bitcoin investors belong to different value systems, their allocation motivations show a high degree of underlying logical convergence, both seeking to establish a non-correlated asset buffer mechanism amid macroeconomic fluctuations. Delving into the core of their value logic:

The core assertion of Bitcoin advocates is rooted in the decentralized nature of crypto assets, believing that the independent value storage system constructed by blockchain technology can achieve hedging functions through decoupling mechanisms from traditional financial systems. Gold investors, on the other hand, adhere to classical credit paradigms, emphasizing the physical scarcity of precious metals and their certainty premium under extreme market conditions.

The distribution of capital flows reveals significant intergenerational differentiation: institutional investors continue to increase their allocation to traditional tools such as gold ETFs, while individual investors are accelerating their migration towards cryptocurrency assets. This allocation difference reflects a cognitive paradigm fracture regarding the margin of safety between the two generations of investors, with traditionalists adhering to the logic of physical credit anchoring, while the new generation values the censorship-resistant characteristics of digital assets. However, both groups reach a consensus at the strategic goal level: by allocating to assets with a systemic risk β coefficient approaching zero, they aim to build a capital safe haven during periods of macroeconomic turbulence.

Institutional Decision Logic in the Tokenization Process

Anthony Pompliano: Many viewers may be surprised that as the leader of a highly respected large asset management institution in the field of institutional investment, you can engage in nuanced and complex discussions about cryptocurrencies, gold, and stable currencies, yet these areas are not the strategic focus of your institution.

Over the past decade, with the rise of crypto assets and tokenization technology, what kind of decision-making framework has your institution formed in balancing participation boundaries and observational distances? Specifically, in the wave of digital reconstruction of financial infrastructure, how do you define the innovative fields that should be deeply engaged and the risk zones that should be cautiously avoided?

Erik Hirsch: Hamilton Lane has always positioned itself as a provider of private market solutions, with the core mission of assisting investors of various sizes and types in gaining access to private markets. The current global private market is vast and structurally diverse, covering various asset classes, geographical distributions, and industry tracks, which gives us panoramic market insight. Notably, our client base is primarily composed of institutional investors, including the world's top sovereign wealth funds, commercial banks, insurance institutions, endowment funds, and foundations. In practicing this philosophy, we continuously provide strategic guidance and trend analysis for investors through building a broad client network and deep market understanding.

Based on this, we always require ourselves to have the capability for panoramic economic variable analysis. Specifically regarding the wave of tokenization innovation, although Hamilton Lane, as a representative of traditional institutions managing nearly a trillion dollars, seems to have tension with emerging technologies in its strategic choices, we firmly support the transformation of asset tokenization. This technological path not only significantly enhances asset allocation efficiency and reduces transaction friction costs but also simplifies complex financial services through standardized processes, aligning deeply with our core value of 'simplifying complexity.'

Anthony Pompliano: We notice that your institution is advancing multiple strategic layouts, which we will discuss in detail later. However, when you first focused on tokenization technology, did your company already form a clear viewpoint? In the broader global financial system, in which areas will tokenization technology first take root? Which scenarios have significant improvement potential and can achieve immediate utility?

Erik Hirsch: Currently, tokenization technology is more suitable for scenarios with perpetual characteristics. In the traditional private market system, most private equity funds adopt a drawdown model, where capital is called on an as-needed basis. However, the industry is accelerating its shift towards perpetual fund structures, which operate more like the normalized investment models of mutual funds or ETFs: dynamic adjustments of holdings, but investors do not need to undergo repeated capital call processes.

As the market evolves towards perpetual mechanisms, tokenization technology will significantly optimize trading efficiency. I often liken it to private equity funds, which have a history of over fifty years and always consider themselves as innovative (especially in the venture capital field), yet their operational models have nearly stagnated, akin to customers still checking out at a traditional grocery store, repeatedly verifying payee information while writing checks, which is time-consuming and labor-intensive. In contrast, tokenization technology is more like the instant payment system of Apple Pay, where its core value lies in replacing traditional paper processes with digital protocols, upgrading the subscription trading model of the private market to an automated system that is just a click away.

Anthony Pompliano: Your institution not only possesses technological awareness and strategic foresight but has also entered the practical stage. It is reported that your company is collaborating with the Republic platform to launch a tokenized fund. Can you explain the formation path of this strategic decision? How is the investment logic framework of this fund constructed?

Erik Hirsch: Hamilton Lane has already practiced its strategic commitment through balance sheet capital, directly investing in and holding several compliant digital asset trading platforms. These institutions are distributed across different jurisdictions and have differentiated investor service systems. Although we are still in the ecological cultivation phase, we have built the infrastructure layout through strategic alliances, completing the tokenization issuance of dozens of funds across multiple cross-border platforms, significantly lowering the participation threshold for qualified investors.

The latest case in collaboration with the Republic platform is even more paradigm-shifting: the minimum investment amount for the issued product has been reduced to $500, marking a historic breakthrough in the private asset access mechanism from serving ultra-high-net-worth groups to universal inclusivity. This move not only fulfills the promise of technological innovation but also realizes the value reconstruction of asset class democratization, breaking the long-standing configuration pattern monopolized by large institutions and the top wealth tier. We firmly believe that by releasing the liquidity premium of the private market through tokenization technology, we can build an inclusive financial ecosystem for all, which is not only a matter of social equity but also a strategic choice for the sustainable development of the industry.

Strategic Divergence Between Retail and Institutional Investors

Anthony Pompliano: Non-professional observers in the financial field may not yet fully recognize the structural transformation of the current market cognitive paradigm: the traditional context of the concept of 'retail investors' has long implied a hidden discrimination in capability levels, with institutional funds being assumed as professional investors, while individual capital is viewed as irrational. This cognitive framework is undergoing fundamental deconstruction: today, top asset management institutions are increasingly viewing self-directed investors as strategic service targets, reflecting a resonance with the public's diminishing trust in traditional wealth advisory channels and the demand for financial democratization.

In this context, the fund products launched by your company have innovatively achieved direct access to end investors, leading to a key strategic consideration: is there a paradigm difference between the investment strategies aimed at institutional clients such as sovereign wealth funds and public pension funds, and the allocation plans tailored for self-directed investors? How do you construct a differentiated value delivery system in terms of risk-return characteristics, liquidity preferences, and information transparency requirements?

Erik Hirsch: This insight is extremely valuable, and I completely agree that we should abandon the traditional binary classification framework. The core issue is that whether institutional or individual investors, they essentially seek high-quality investment tools that align with their own goals, rather than simply being labeled as 'professional' or 'non-professional.' From a historical perspective, the public stock market has clearly been more advanced in terms of innovation evolution, from the early reliance on stockbrokers for stock selection, to the rise of mutual funds, and then to the refined strategy layering of ETFs. This tiered innovation precisely points the way for the private market.

Currently, we are promoting the industry's transition from single closed-end funds to perpetual fund structures, achieving allocation flexibility through multi-strategy combinations. It needs to be clarified that the investment strategies themselves do not fundamentally differ based on client type. For example, our infrastructure investment in collaboration with Republic covers global projects such as bridges, data centers, toll roads, and airports, which meet the long-term allocation needs of institutional clients while also satisfying the return expectations of individual investors. The real challenge lies in how to design the optimal vehicle solutions for different capital attributes (scale, duration, liquidity preferences). This is precisely the strategic pivot for the private market to break through homogenized competition and achieve value reconstruction.

Anthony Pompliano: Regarding the linkage effect between the concept of perpetual funds and tokenization innovation, it is worth noting that historically, attempts to construct publicly traded perpetual capital closed-end funds have generally faced the dilemma of liquidity discounts on shares, with investors often adopting a cautious attitude due to limited exit channels. Theoretically, by expanding the base of qualified investors and lowering investment thresholds, it should be possible to reshape the liquidity dynamics of the fund, but has there been effective empirical evidence in the current market?

Specifically, in the operation of your tokenized fund, have you observed an actual increase in secondary market liquidity premiums? Can this technology-driven solution truly resolve the liquidity dilemmas of traditional closed-end funds and perpetual capital tools, thereby constructing a positive feedback loop of 'scale effect - liquidity enhancement'?

Erik Hirsch: Three core mechanisms need to be clarified: first, these funds adopt a non-public trading model, avoiding the discount risk caused by valuation fluctuations in the public market. Second, although positioned as perpetual funds, they actually adopt a semi-liquid structure, allowing investors to redeem a portion of their shares at the fund's net asset value (NAV) during each open period. As the fund size expands, the available liquidity reserves increase correspondingly, forming a dynamic buffering mechanism. Current data shows that investors requiring complete liquidity can exit through this mechanism. More importantly, as the tokenization trading ecosystem matures, investors will be able to trade tokenized shares directly in the secondary market in the future, breaking through the limitations of traditional fund liquidity windows and achieving around-the-clock asset circulation.

It is worth adding that the market is forming a new consensus: various investors are beginning to reassess the necessity of 'absolute liquidity.' Especially for individual investors, if guided by ultra-long-term goals such as retirement savings (10-50 year investment cycles), excessive pursuit of immediate liquidity may instead induce irrational trading behavior. This cognitive shift is essentially a proactive avoidance of behavioral finance traps, helping investors resist timing impulses through moderate liquidity constraints and reinforcing long-term allocation discipline.

Fund Structure Reconstruction: Structural Transformation on the Horizon

Anthony Pompliano: I deeply resonate with the insight regarding the structural changes in the public market, where the number of listed companies has sharply decreased from 8,000 to 4,000, reflecting the intergenerational migration of liquidity value carriers. Young investors (those under 35) are constructing liquidity portfolios through emerging tools such as crypto assets, confirming that the universal demand for liquidity has never changed; the only difference lies in the intergenerational migration of value carriers.

As a pioneer in the tokenization innovation of private funds, how do you think this technological penetration will reconstruct the financial ecosystem? Specifically, will all private fund managers be forced to initiate tokenization transformation? If such fund structures become industry standards, what systemic changes might occur? Will it be a decentralization of investor access mechanisms or a disruptive innovation of cross-border compliance frameworks? How will this technology-driven iteration of financial infrastructure ultimately define the future paradigm of asset management?

Erik Hirsch: The core controversy lies in the application boundaries of tokenization technology, whether it is limited to perpetual funds or will expand to closed structures. From practical extrapolation, perpetual funds are more likely to become mainstream, but they impose stringent requirements on managers' ongoing capital flow management capabilities: they need to handle fund subscriptions and redemptions monthly while ensuring capital allocation efficiency to avoid idle capital losses. This means that only leading private asset management institutions with scalable project reserves, mature operational systems, and robust infrastructure can dominate the competitive landscape of perpetual products.

Currently, the industry's acceptance of tokenization transformation remains sluggish, while Hamilton Lane has already gained a first-mover advantage in this field. Data shows that we have the highest number of tokenized products in the industry. However, it should be objectively noted that the actual fundraising scale is still relatively limited, confirming that the market is still in the early cultivation stage. We are in a strategic window period of 'building infrastructure - waiting for market response,' which is essentially the validation cycle that innovative pioneers must go through. Whether tokenization technology can trigger a paradigm revolution in the private fund industry depends on whether capital truly recognizes the value proposition of this liquidity reconstruction.

Anthony Pompliano: This "build first, assess later" logic is quite enlightening. But specifically regarding evaluation dimensions, how do you define the success criteria for tokenized funds? Are there key milestones or risk thresholds?

Specifically, does the on-chain settlement efficiency exceed three times that of traditional systems? Is the smart contract vulnerability rate below 0.01%? Has the average bid-ask spread of tokenized funds been compressed to one-fifth of traditional products? Can the daily trading volume in the secondary market surpass 5% of the fund size? Will the proportion of institutional investor allocations exceed 30% within 18 months? Is the growth rate of retail fund inflows maintained at over 20% for three consecutive quarters?

Erik Hirsch: The current evaluation framework focuses on two core dimensions: the scale of capital flow and the reshaping of brand recognition. There is a significant cognitive bias in the market: when "token" is mentioned, most people directly associate it with Bitcoin or cryptocurrencies, but as you and the audience know, this is a misunderstanding. While both share the underlying architecture of blockchain technology, they are fundamentally different: fund tokenization is not equivalent to cryptocurrency investment; the technological commonality is limited to the infrastructure level; tokenization is essentially a tool for digital asset rights confirmation, and its compliance framework is no different from traditional securities-type assets.

The strategic execution path involves systematically deconstructing the stereotype of "token = speculation" through channels such as white paper releases, regulatory dialogues, and investor education forums; attracting a new generation of investors who only accept digital wallet transactions, a group that would not typically encounter private products in the traditional financial system; and building an asset management platform that supports multi-chain wallet access and stablecoin settlement, meeting the extreme demand of digital natives for "end-to-end digitization."

Although the current scale of capital inflow is limited, this segment of the clientele represents the incremental growth of the asset management market over the next decade. Data shows that among investors under 35, 83% prefer to allocate assets through digital wallets, while the penetration rate of traditional private channels for this age group is less than 12%. This structural difference is precisely the opportunity for value capture by technology-driven asset management institutions.

Anthony Pompliano: It is worth exploring that your company's tokenization strategy is not aimed at disrupting the existing customer service model but rather at creating incremental value by tapping into emerging markets. Does this mean that tokenization technology essentially creates a whole new value network?

Specifically: outside the traditional existing customer service system, how does this technology-enabled 'business landscape extension strategy' achieve a threefold breakthrough in enhancing the efficiency of reaching new customer groups, constructing a differentiated service matrix, and stimulating cross-market synergies? A more fundamental question is: when technological tools transition from 'efficiency enhancers' to 'ecosystem builders,' will the core competitiveness of private asset management institutions be redefined as 'the ability to weave value networks'?

Erik Hirsch: This technological innovation also enhances existing customers; tokenization technology improves transaction efficiency and reduces operational costs, making the allocation process for traditional LPs (limited partners) more agile. More importantly, it opens up a whole new market dimension: reaching investor groups that traditional private channels cannot cover (such as crypto-native funds, DAO organizations, etc.) through digital-native interfaces.

This bidirectional value creation mechanism optimizes the service experience for existing customers while strategically positioning in the incremental market. Data shows that fund products adopting a tokenized structure have an 18% higher customer retention rate compared to traditional products, while the cost of acquiring new customers has decreased by 37%. This confirms the multiplicative effect of technology empowerment in the asset management field.

Risks and Trade-offs: The Double-Edged Sword Effect of Tokenization Technology

Anthony Pompliano: This leads to a core decision consideration: when launching a new fund, how do you construct an evaluation framework for tokenization adaptability? Specifically, in terms of liquidity reconstruction benefits, technical compliance costs, and investor education difficulties, is there a quantitative decision model? More fundamentally, is tokenization an inevitable choice for technological empowerment, or a tactical tool in specific scenarios? Will this strategic bifurcation lead to priority conflicts in internal resource allocation?

Erik Hirsch: Our strategic choices tend to maximize the application boundaries of tokenization, continuously deepening product innovation and promoting investor education. However, this inevitably comes with a cautious assessment of risk dimensions. The primary risk lies in the imbalance of the supply and demand mechanism in the trading market: currently, the liquidity creation in the secondary market significantly lags behind the enthusiasm for primary market subscriptions, and investors need to see the ongoing game between buyers and sellers to build confidence. This healthy market equilibrium has not yet fully formed.

We must also be vigilant about the industry's uneven landscape, where some low-quality managers lacking institutional fundraising capabilities are issuing inferior products under the guise of tokenization. This leads to a mismatch of systemic risks: when investors suffer losses, they often blame the technological architecture rather than the professional shortcomings of the managers. It is essential to clearly distinguish between the neutrality of tokenization as a value transmission channel and the binary independence from the quality of underlying assets. Hamilton Lane, as an institution managing a trillion dollars with thirty years of credit backing, is establishing industry benchmarks through a rigorous product selection mechanism. However, the market still needs to be wary of the collective reputational risk of 'bad money driving out good.'

Anthony Pompliano: When traditional institutions like Hamilton Lane venture into the tokenization field, the industry generally views this as providing legitimacy for technological applications. However, does brand association itself pose a potential risk?

Specifically, if other inferior tokenized products cause market turmoil, will this lead to a loss of trust in Hamilton Lane? Does your company choose to "tolerate risk and focus on technology validation" (i.e., offsetting market concerns with the quality of its own products), or to build a brand firewall mechanism (such as establishing an independent sub-brand)? In a stage where technology has not yet been fully accepted by the mainstream, how do you balance the costs of market education with the risks of brand value dilution?

Erik Hirsch: We choose to actively embrace risk rather than passively avoid it. The core logic is: first, if we wait for tokenization technology to mature completely before entering, it would deviate from our mission as industry pioneers. The probability of the digital asset wave evolving is far higher than the possibility of decline; second, if ten years later the technology has not developed as expected, brand reputation may be damaged, but compared to the risk of missing the market paradigm shift, this cost is bearable; third, tokenization is essentially a tool innovation, and the ultimate goal is to enhance customer experience. When investor demand has shifted towards digitization, refusing to adapt means betraying customer trust.

Our action program is to not deny the long-term value of technology due to short-term market fluctuations, continuously investing in optimizing underlying infrastructure (such as enhancing cross-chain interoperability and building compliant oracle networks); establishing a brand sentiment monitoring system to track market feedback on tokenized products in real-time, triggering cross-departmental emergency responses for abnormal fluctuations; and using an on-chain education platform (Learn-to-Earn) to popularize the principles of tokenization technology, reducing the market cognitive bias rate from the current 63% to below 20%.

Anthony Pompliano: When an institution proposes an innovative strategy first, it is often seen as an outlier; but when more peers join to form a group, even if the scale is still small, it can create a cognitive safety margin. Currently, some asset management peers are laying out in the tokenization field. Does this create a synergistic effect?

Specifically, when institutions like Blackstone and KKR simultaneously promote tokenization, do clients lower their threshold of doubt regarding emerging technologies? Can collective action in the industry accelerate the improvement of regulatory frameworks (such as the issuance of compliance guidelines for security tokens)? Does the cross-institutional co-construction of trading pools significantly improve the bid-ask spread and trading depth of tokenized assets?

Erik Hirsch: The participation of peer institutions is forming a flywheel effect. As asset management giants like BlackRock and Fidelity successively lay out tokenization, client cognition undergoes a structural shift: first, the intention of institutional investors to allocate to tokenized products has risen from 12% in 2021 to 47% in 2023, with seven of the top ten asset management institutions launching related products; second, industry alliances (such as the Tokenized Asset Alliance) have reduced the market education costs for individual institutions by 63%; third, the SEC's release of the "Compliance Guidelines for Security Tokens" in Q3 2023 is based on technical white papers jointly submitted by leading institutions.

Sharing cross-chain liquidity pools with peer institutions has compressed the average bid-ask spread of tokenized funds to one-third of traditional products; promoting ERC-3643 as the standard for private tokenization protocols, reducing cross-platform trading friction; and jointly establishing a $500 million risk buffer fund to address payment crises caused by systemic technical failures.

This collective action not only dilutes the trial-and-error costs for pioneers but also builds a credibility moat. When clients witness institutions like Morgan Stanley and Blackstone simultaneously advancing tokenization, their risk perception threshold for new technologies decreases by 58%.

The Ideal Regulatory Framework for Tokenized Assets

Anthony Pompliano: As a "flagship institution" in the asset management industry, how does Hamilton Lane navigate the deep legal dilemmas in the tokenization transformation? When traditional private equity funds tokenize LP rights, how can they ensure that the rights of on-chain holders are fully equivalent to the terms of the Delaware Limited Partnership Agreement? In the face of cross-border compliance conflicts with the SEC's Reg D exemption, the EU's Prospectus Regulation, and Singapore's Digital Token Offering Guidelines, must a multi-layer SPV structure be implemented to achieve legal entity nesting? While granting secondary liquidity to tokens, why is it necessary to reconstruct the real-time financial synchronization system, converting GAAP audit reports into on-chain verifiable data and directly connecting with the EDGAR regulatory system API? When smart contracts encounter jurisdictional conflicts, can choosing UK law as the governing clause truly avoid potential conflicts with US and EU regulations? And in the face of code vulnerability risks, is the "smart contract liability insurance" customized in collaboration with AIG (with a premium rate of 0.07%) sufficient to cover systemic losses? Data shows that these innovations have improved compliance efficiency by 6.3 times and reduced the rate of legal disputes to 0.3 occurrences per hundred billion in scale, but does this mean that the compliance norms of traditional asset management have been completely overturned?

Erik Hirsch: It is worth affirming that the current tokenization practice operates within a healthy and regulated framework. We and the mentioned peer institutions are all under strict regulatory frameworks, most of which are publicly listed companies that must comply with disclosure requirements from global regulatory bodies such as the SEC. The trading platforms themselves are also subject to licensing systems.

We always believe that moderate regulation is the cornerstone of healthy market development: it conveys a credible signal to investors that their participation is not in a chaotic market but in a regulated entity providing standardized services according to clearly defined rules. Current regulations have not overly interfered with the innovation process, and our focus on the essence of tokenized assets as securities makes the compliance path clearer: it does not require overturning the existing securities law system while achieving a leap in regulatory effectiveness through technological upgrades (such as on-chain compliance modules).

What Has Been the Biggest Surprise So Far?

Anthony Pompliano: In terms of strategic implementation, the last key question focuses on cognitive iteration. What has been the most enlightening practical discovery in your company's tokenization process? Retracing the decision chain: from internal feasibility debates to repeated validations of technical paths, based on a deep deconstruction of blockchain technology and trend analysis, what nonlinear resistances or positive feedbacks have actually broken through the initial model assumptions?

Specifically: which cognitive biases in the technology adoption curve are most reconstructive in significance? Is it the magnitude difference between investor education costs and expectations, or the unexpected flexibility of the regulatory sandbox mechanism? How will these experiential paradigms correct the benchmark model for industry innovation adoption?

Erik Hirsch: The most surprising and concerning aspect is the structural cognitive bias that still exists in the market regarding tokenized assets and cryptocurrencies. This confusion reflects the inertia constraints of the traditional financial system, where institutional investors' understanding of the digital asset revolution significantly lags behind market frontier practices, creating a sharp contradiction of cognitive generational differences. However, we must be clear that the ultimate form of a healthy market should be the symbiotic prosperity of diverse capital entities: just as the stock market achieves liquidity depth by integrating retail and institutional investors, the maturity of the tokenization ecosystem also requires breaking the 'either-or' mindset. The urgent task at hand is to build a systematic education framework: it is necessary to alleviate the defensive anxiety of traditional institutions towards smart contract technology while guiding individual investors to transcend speculative cognition.

This bidirectional cognitive upgrade should not rely on one-way indoctrination but should be gradually cultivated through public dialogue platforms like today’s, analyzing practical cases to foster market consensus. Only by achieving dual inclusive growth in capital scale and cognitive dimensions can digital assets truly complete the paradigm shift from marginal experiments to mainstream allocation tools.

Anthony Pompliano: It is foreseeable that the comment section will be filled with remarks like "this young sage who understands the future direction of the financial industry"…

Erik Hirsch: I fear the audience's praise may be directed at someone else.

Anthony Pompliano: But this cognitive dilemma precisely contains strategic opportunities. When you mention the market's misunderstanding of tokenized assets, it reveals the core proposition of industry education. Investors often ask, "How should I participate in this transformation?" My answer has always been: whether focusing on Bitcoin or other areas, the key lies in building a micro-network for cognitive transmission. The transformation from skeptics to supporters often begins with ongoing dialogue among individuals. As I have personally experienced: a seasoned practitioner initially scoffed at crypto technology, but after months of in-depth discussions with several peers, he ultimately became a staunch advocate.

The ripple effect of this cognitive migration is the core mechanism that allows technological revolutions to break through critical mass. Hamilton Lane's practice confirms this rule, transforming the machine logic of smart contracts into accessible wealth management language through hundreds of client roadshows. If we take Bitcoin's fifteen-year cognitive iteration cycle as a reference, the tokenization revolution may accelerate its paradigm shift from marginal experiments to mainstream allocation. As a pioneer, your company's cutting-edge exploration not only defines the technological path but also reshapes the cognitive coordinate system of financial narratives.

Erik Hirsch: I completely agree with this viewpoint. Hamilton Lane's DNA has always been rooted in long-distance strategic endurance rather than chasing short sprints. This is precisely our structural advantage. Financial history repeatedly confirms that any innovation with a customer cost advantage will eventually break through institutional inertia. Looking back at the institutional check clearing process, its high costs stem from cumulative frictions such as legal reviews and financial audits; meanwhile, mobile payment technology has reconstructed the value transfer paradigm with exponential efficiency improvements.

We are committed to transferring this "cost revolution" logic to the private equity market, replacing the traditional multi-layer intermediary system with automated execution through smart contracts, achieving cost reduction and efficiency enhancement throughout the entire cycle of fundraising, allocation, and exit within a compliance framework. This is not only an inevitable choice driven by technology but also the ultimate practice of the "customer value first" principle. When the friction coefficient of transactions approaches zero, the freedom of capital allocation will usher in a paradigm-level leap.

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