Imagine a world where asset managers can tailor portfolios to individual investors at scale. Thomas Sy, head of multi-asset solutions at New York Life Investment Management (NYLIM), believes tokenization is the key to this future. As he told CoinDesk, the real innovation lies in rebuilding how investment portfolios are constructed, not just faster settlements or round-the-clock trading.

Sy, whose team manages around $11 billion, argues that blockchain could revolutionize asset management by allowing for customization that today's systems can't achieve. He highlights the potential to enhance investor returns by embedding customization within the asset itself, simplifying the complex mix of ETFs, bonds, and private credits in portfolios.

NYLIM isn't just theorizing, either. It's partnering with Centrifuge to bring high-yield corporate bond strategies on-chain. This isn't about making blockchain replicas of existing funds; it's about transforming how portfolios are assembled.

And it's not just NYLIM. Banks and asset managers are betting big on blockchain's potential, with Citi projecting the market for tokenized real-world assets could balloon to $5.5 trillion by 2030 from a mere $30 billion today.

Sy also sees stablecoins as a crucial bridge for traditional finance entering the blockchain world. The stablecoin market, now over $300 billion, is increasingly used for cross-border payments, providing an on-ramp to on-chain tokenized assets that offer yield.

Yet, the road to institutionalized DeFi isn't fully paved. Market infrastructure like tokenized collateral and central clearing still need maturation, Sy notes. But he's confident it's just a matter of time before these elements fall into place, broadening the demand for tokenized investment products.

Tokenization advocates often point to faster settlement, around-the-clock trading, and using the tokens in decentralized finance (DeFi) as the biggest advantages of bringing traditional assets onto blockchain rails. However, Sy emphasizes that the technology's biggest opportunity lies in rebuilding how investment portfolios are constructed.

"We believe that the future of asset management is going to be customization," Sy told CoinDesk. "The only technology that can help us get there at scale is the blockchain."

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His view highlights a less-discussed use case for tokenization as Wall Street's blockchain efforts accelerate. Banks, asset managers, and market infrastructure firms are increasingly issuing tokenized versions of money market funds, private credit, and equities, betting that blockchain can modernize financial plumbing.

NYLIM was the latest entrant to the list of asset management giants making moves in tokenization, teaming up with Centrifuge (CFG) to bring one of its high-yield corporate bond strategies on-chain. For NYLIM, tokenization is less about launching blockchain versions of existing funds than improving how portfolios are assembled.

Sy said customized investment strategies often combine ETFs, bonds, private credit, and other assets, creating operational complexity that makes personalization difficult to scale. "The end goal is to embed the customization within the asset itself, rather than the customization sitting around the operations around the different assets," he said.

Tokenization could also streamline transfer agency, settlement, and other back-office processes, reducing costs that ultimately benefit investors. "If you can bring that down by 10% or 20%, that's a better outcome for our clients," Sy said.

Sy said stablecoins have become the first practical bridge bringing traditional financial institutions on-chain. The stablecoin market has grown to over $300 billion and is increasingly used for cross-border payments. As banks, payment firms, and fintech companies adopt stablecoins for cross-border payments and treasury management, many will eventually look for institutional-grade tokenized assets where those balances can earn yield instead of remaining in cash.

"Stablecoins were probably one of the biggest unlocks in the past two years," Sy said. "Adopting stablecoins was the gateway to get them on-chain."

He expects that shift to broaden demand for tokenized investment products over the next several years. NYLIM is also studying DeFi, though Sy said broader institutional participation will require more mature infrastructure, including tokenized collateral, central clearing, and prime brokerage services.

"I do think there is a use case for [DeFi], but we need a little bit more time for it to institutionalize," he said.