Distributed ledger (or blockchain) technology has been a central topic of debate at FundForum. It’s undoubtedly going to have a huge impact on our industry, but how will it affect the fund management space?
Given limited budgets and existing technological priorities, such as digital distribution and big data, few fund managers are currently contemplating distributed ledger investment. However, despite a fairly passive approach so far, most managers are giving active thought to the technology, due to the far-reaching long-term affects it could have on the operating models that support core activity.
There are some exciting potential use cases for blockchain in fund management – across the front, middle and back office.
It could be used to build closer relationships between asset managers and asset services, for example. The technology could provide a single all-purpose connection, filling existing ‘air gaps’ and providing a seamless combined book of record. That would have a range of benefits in areas such as investor reporting, regulatory compliance, custody and settlement.
Distributed ledger could also be extended to the processes that continue to be manually intensive, stretched across multiple participants or simply not quick enough. Take IBOR for example, and the challenges many face in aggregating data across different platforms in order to generate this – a process that can take up to 24 hours. With a single, shared book of records, IBOR in real-time could become a reality.
In the front office, distributed ledger technology could affect the way clients are on-boarded and how trades are captured, while also providing a ‘golden source’ of portfolio management data.
With such a range of possibilities, it is easy to see how distributed ledger will have a genuinely revolutionary impact on financial markets.
Change may well be gradual, but it will not be something that any financial institution can ignore.