Somewhere on every asset manager's wishlist has been a
FinTech solution that fosters a more direct connection to their
end-users. After all, bankers have gotten big data and artificial intelligence tools,
investment specialists have gotten robo-advisors, and compliance
officers are getting plenty of RegTech offerings.
Well, just in time for Christmas we are pleased to announce that
a blockchain-driven product for fund managers has arrived. (A live demo was held yesterday on
KPMG's premises in Kirchberg). The result of a collaboration
between Fundsquare, InTech (subsidiary of POST Group) and KPMG
Luxembourg, the platform will allow asset managers to sell funds
directly to investors, which in turn will dramatically reduce the
cost of administration and the time taken to process
The platform, which could perhaps be better called an ecosystem,
aims to streamline a whole range of fund administration and
order-routing tasks by using blockchain to automate several
processes in a secure manner. In other words, the messaging that
must occur amongst the investor, the asset manager, the custodian
bank, and the transfer agent is about to become much simpler.
Whereas the time between an investor making a decision and a
transfer agent executing it currently takes up to about six days,
this new fund distribution product will do it in a couple of hours.
And in the not-too-distant future, seconds.
Naturally, these six days, and the money invested in them, is
something that many fund managers and investors are eagerly looking
forward to getting back.
Notably, unlike similar products recently launched, this fund
platform will ease AML/KYC fund data look-through and MiFID
verification by standardising it and allowing the factorisation of
such repetitive tasks. These capabilities draw on smart contracts
which are considered to be the utmost in cyber-secure transaction
technology. This feature should answer one of asset managers'
main compliance bugaboos.
The dawn of an ecosystem
As a market infrastructure, Fundsquare is ideally placed to
offer a fund blockchain for investment professionals. Olivier
Portenseigne, Managing Director of Fundsquare, described the
company's role in administering the distributed ledger:
"Since blockchain's original usage with Bitcoin, we
have been wondering how we could unlock the technology's
potential for investment funds. We soon realised that it had the
potential to revolutionise not only one part of the distribution
process, but the entire supply chain—the difficulty, however,
lay in turning the talk into action. This is how our small commando
team was born. With InTech and KPMG Luxembourg, we were able to
take a pragmatic approach to the project, and in doing so, speed up
the development process. The live demo today is a real milestone in
InTech, a Luxembourg-based IT company, has been working on
blockchain codes, smart contracts, and user interface. Fabrice
Croiseaux, CEO of InTech, explained how the new product would
revolutionise the industry:
"By combining our expertise around distributed ledger
technologies, Fundsquare's vision, and KPMG's deep
understanding of the fund market, we have been able to deliver the
foundation of a new generation platform in a very short time. It is
not only the investor and asset manager that can plug into the
system: everyone in the fund distribution supply chain, from
custodians, to transfer agents, to asset service providers, can
benefit. It really aims to connect the dots, by harmonising a
currently fragmented fund distribution process."
KPMG Luxembourg, for its part, advises on user experience based
on our knowledge of the asset management industry. We also wrote
the business requirements for the development of the product. If
the analogy can be forgiven, we are the glue combining the IT
engineers and the order-routing specialists to ensure that the end
product is exactly what asset managers want.
Luxembourg's back-office crown
Naturally, the new product augurs a broader change in
Luxembourg's pool of expertise. Intermediaries like transfer
agents have great stores of knowledge and are well placed to be an
active part of the industry's revolution. However, they also
have the most at stake when it comes to the brand new world of digitalised fund distribution.
Blockchain technology has been a favourite topic amongst
2016's top speculators, as a technology enabling secure
transactions that could be applied in a myriad of areas (this recent article singles out the top
25 potential uses from a pool of 120). We are very pleased to see
this talk start to crystalize with InTech, Fundsquare, and
KPMG's new offering. Please visit the FundsDLT
webpage if you are interested in more information.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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