Transforming the distribution of funds using blockchain
FundsDLT aims to make the distribution of investment funds easier by bringing asset managers and investors closer together. Showcased on 8 December 2016, the new platform, which is based on blockchain technology, is sponsored by KPMG and consultancies InTech and Fundsquare. In the hope that this solution will create an opportunity for the Luxembourg market, its initiators are inviting all sector players to connect up to it and test it out.
Speaking at one of its “Digital Fund Series” conferences on 8 December, KPMG referred to the disruptions expected in the area of investment fund distribution.
This event saw the unveiling of a new digital platform based on blockchain technology, sponsored by KPMG, InTech and Fundsquare. The partnership between these three players, with their range of technological expertise and business lines, has led to the creation of a solution which aims to bring together the various stakeholders in the “fund” ecosystem to speed up the distribution of products and cut costs. “In Europe there are several layers between the investor and the asset manager: the distributor, the distribution platform, the central securities depository, the transfer agent, etc. With the result that the asset manager setting up the product has no detailed knowledge of the person investing in it,” remarks Said Fihri, a partner at KPMG. “On top of this we have KYC and anti-money laundering obligations, with many players performing redundant tasks, not to mention new regulatory requirements.”
Eliminating current complications
This tedious and costly process means that the industry is no longer managing to serve the smallest investors. “The sector misses out on 90% of the assets which could potentially be invested in funds,” continues Said Fihri.
In a bid to match actions to words, KPMG, InTech and Fundsquare joined forces to imagine the future of fund distribution. They have jointly set up a new platform which aims to bring investors and asset managers closer together, but without bypassing the other players in the ecosystem. This new platform, FundsDLT, is based on blockchain technology. “It brings together the various participants in the distribution process, replicates the existing model, while introducing new concepts,” explains Olivier Portenseigne, managing director of Fundsquare. “The idea is to offer an additional or alternative distribution model and make access to fund investment easier, but also to provide greater transparency.”
Invitation to players
By establishing smart contracts within the blockchain platform, the participants in the distribution process, from the investor to the asset manager, but also the regulator, can access information in real time. In particular, these smart contracts enable a series of functions to be automated, making distribution smoother and leading to a significant and necessary reduction in the number of administrative and compliance procedures.
While distribution of a fund to an investor may take several days, its initiators hope that the platform can reduce this to hours, minutes or even seconds.
The platform is now operational. “It is more than simply a tool – we have recreated an ecosystem,” explains Said Fihri. “Now it’s over to all of you: fund sector players, auditors, regulators, legal advisers. The technology now exists in Luxembourg. It is up to you to join the new revolution, by testing this platform and helping it develop with us.”