In an article by the FT, online ledger technology, best known for its use with trading Bitcoin, could save asset managers an estimated £1.9bn ($2.7bn), based on daily trade volumes of funds in the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia.
There is no doubt that the global funds industry is going through a period of change. The rise of the robo-adviser, and the need to capture a new type of investor, who doesn’t want to pay excessive fees. That is where ‘blockchain’ technology comes in.
There are many new ways in which fund businesses can supply their services, including new direct to consumer (D2C) offerings. Technology company, Calastone reported that 57% of respondents believed online D2C distribution channels such as fund platforms would take over from existing, traditional models.
This is part of a wider industry move towards digital fund distribution.
Julien Hammerson, CEO of Calastone, says: “Our vision is to enable friction-free trading for funds industry participants. The scale and connectivity we have built in major markets around the globe makes us the natural partner to explore operational and infrastructural [efficiency] across the global funds industry.”
Changing with the times
Earlier this year, BNP Paribas Asset Management said it had successfully completed a full end-to-end fund transaction test using blockchain technology.
The project involved a tie-up between BNP Paribas Securities Services’ blockchain programme, Fund Link, and FundsDLT, a blockchain-based decentralised platform for fund transaction processing.
The UK government recently set out an ambition to create a blockchain-enabled digital fund that would use distributed ledger technology to streamline back-office fund administration functions in a bid to increase speed and reduce cost.
Last year, global accountancy firm, Ernst & Young (E&Y) published a report ‘Blockchain innovation in wealth and asset management.’ In this report, E&Y highlighted the benefits of wealth and asset managers taking up blockchain which can be leveraged to build a client profile, for example.
However, E&Y issued a word of caution saying blockchain technology and its application to financial services firms is in its early stages: “Additionally, there are many critics who claim that blockchain technology is looking for a business problem to solve, and we agree that business cases should drive technology solutions, not the other way around.”
Sabuhi Gard is an investment writer for Incisive Works.
Further reading on this topic: