Onchain asset management is the business of managing other people's money where the portfolio, the record of who owns what, and the movement of capital all sit on a public blockchain. A manager defines a strategy, depositors receive tokens representing their share of it, and the positions and the share price are visible to anyone at any time.
The structure maps onto a fund, in that depositors are investors, the token is the share class and the strategy is the mandate, and how those strategies are constructed, valued and distributed is covered at length in onchain asset management.
How does it work?
A depositor sends assets to a contract and receives shares. The manager deploys those assets across venues, the share price moves with the value of the positions, and redeeming burns shares and returns assets.
Everything else hangs off the share mechanic. The contract tracks total assets and total shares issued, your shares are worth the first divided by the second, and when the strategy earns, total assets rise while the share count does not, so each share is worth more. Nobody distributes anything; the arithmetic does the work. Most of these contracts follow ERC-4626, a finalized standard for tokenized vaults that fixes the names and behaviour of deposit, mint, withdraw, redeem and the total-assets query, so any wallet or accounting tool can read a strategy it has never seen. Where positions cannot be unwound instantly, ERC-7540 replaces the immediate call with a request that passes through a pending stage and then a claimable one before the depositor collects.
Who are the parties?
Four, and one of them has no traditional equivalent. Depositors, or the allocators acting for them, supply capital and hold shares. Defining and running the strategy is the manager, a role often called the curator onchain. Same job, different emphasis: choosing venues, setting exposure limits, rebalancing between them. Managers do not usually take custody; they hold a permission to move the strategy's assets between approved destinations, and the capital actually earns at the venues, meaning a lending protocol, a tokenized treasury fund or a market-making strategy, several of them in a normal case.
The exception is the oracle. Prices for the holdings have to reach the contract from somewhere, and whoever supplies them determines the NAV. Valuation in a traditional fund is an administrator's judgement recorded in a document, and what replaces it onchain is a data feed with an owner.
What is genuinely different from traditional asset management?
Subscription and redemption settle against the fund directly, and the holdings are continuously visible rather than reported monthly.
Buying into a fund traditionally takes days, needing an instruction to a transfer agent, cash settlement and a register update, whereas onchain the cash movement and the share issuance are the same transaction, so there is no dealing deadline on the instant path. Transparency changes diligence. A monthly factsheet tells you what the manager chose to disclose about a month that already ended, whereas an onchain strategy publishes every position continuously, so an allocator can verify concentration limits instead of asking. Competitors can see the trade too, and some strategies do not survive that.
Custody separation works differently too. The manager typically cannot withdraw depositor assets, because the contract restricts where funds may be sent. That removes one category of failure and leaves the other intact, since a manager who cannot steal from the strategy can still allocate it into something that loses money.
The limits
Anything that does not settle in a block breaks the neat version.
Add a tokenized fund that settles the next business day, or a position with a notice period, and the strategy runs on two clocks: a redemption request that has to wait, alongside legs that clear immediately. Reconciling those into one share price is where most of the operational work in this category sits, and valuation is the same problem in another form, since the share price depends on a defensible price for the least liquid holding behind it.
What does this mean for an institution?
At that point the questions change. How it works matters less than who is accountable when it does not, and an institution needs to know who can move the assets, who sets the price, what happens to a redemption request during a stress, and what the auditor receives. Onchain asset management infrastructure covers those requirements and the architecture that satisfies them. The operational side, striking NAV and keeping the register, is onchain fund administration.
Common questions
Is an onchain fund the same as a DeFi vault? A vault is the contract holding capital and issuing shares. Add a mandate, a manager, a valuation policy, reporting and usually a legal wrapper and the vault becomes a fund, though plenty of vaults are not funds in any meaningful sense, and the difference is what governs the manager, not the code.
Who values the portfolio? Whoever controls the price inputs the contract reads. For liquid assets that is usually a market data feed. Anything without a reliable price gets a judgement made offchain by someone and published, and both that party's identity and their method are fair diligence questions.
Can I withdraw at any time? Only if every underlying position can be unwound at any time. Strategies holding instruments with settlement windows or notice periods use a request-based flow, where the withdrawal is recorded first and fulfilled later. Read the redemption terms before the yield figure.