The industry body claims that the blockchain funds would help fill the advice gap and could make it easier for retail investors to purchase illiquid assets.
Tokenised funds are said to split their assets under management into fractions allowing a reduced minimum investment for small investors.
The industry specialists also claim that such funds will also have fewer operational expenses as they use blockchain technology that powers cryptocurrencies.
Investment Association CEO Chris Cummings said: “With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay.”
The IA is urging The Financial Conduct Authority and the government to set up a framework for the operations of such funds.
The regulator should also evaluate the eligibility of cryptocurrencies in investment funds with well-diversifed portfolios.
A spokesperson for abrdn told the news agency: “We are looking at tokenisation and are currently assessing how the benefits of blockchain technology could be leveraged in the regulated funds space.”
“Tokenised solutions should provide new ways for both retail and sophisticated investors to access investment products, including in the illiquid space, thanks to lower investment minimums and improved liquidity mechanisms via secondary token markets.”