April 2018

SPONSORED FEATURE: Blockchain – the next revolution in the alternatives industry

Blockchain is one of THE buzzwords in recent years. Governments, industries and companies alike are seeking to use blockchain technology to boost cybersecurity and build what amounts to a new transaction layer based on the idea that cryptographic keys and shared ledgers can incentivise users to secure and formalise digital relationships. The alternative funds industry is no exception. Various initiatives are underway.

Derivatives processing solutions
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, announced in January 2017 that it had selected IBM, in partnership with Axoni and R3, to provide a ‘distributed ledger technology’ framework to drive further improvements in derivatives post-trade lifecycle events.
The firms will work collaboratively to re-platform DTCC’s Trade Information Warehouse (TIW), building a derivatives distributed ledger solution for post-trade processing based on existing TIW capabilities and interfaces with technology providers and market participants. The distributed ledger protocol built by Axoni is being submitted to the Hyperledger open source community.
Hyperledger Fabric is a modular, scalable, secure permissioned blockchain framework that allows enterprises to develop their business solutions. Hyperledger Fabric leverages container technology to host smart contracts called ChainCode that comprise the application logic. Initially contributed by Digital Asset and IBM, Hyperledger Fabric has 159 engineers from 28 organisations contributing to this project.

Digital identity solutions
The Cayman Islands has rapidly developed into a hub for blockchain technology. With Cayman Finance’s working group, Fintech Innovation labs, teams are working on building an identity ecosystem and prototyping globally certified digital IDs as a federated service, where participants would purchase tokens to verify the identity information to perform their Know Your Client/Anti-Money Laundering (KYC/AML) processes. This service could be relied on by banks, for example, to vastly reduce costs – banks currently spend 20% of their expenses towards KYC/AML.

Fund distribution solution
In July 2017, Natixis Asset Management completed a first real blockchain transaction in fund distribution. This was enabled by FundsDLT, a platform developed to enable asset managers to sell funds through a new distribution channel while significantly reducing administration costs and time to process transactions for both asset managers and other service providers. It is the result of collaboration between Fundsquare (a subsidiary of the Luxembourg Stock Exchange), InTech (a subsidiary of POST group) and KPMG Luxembourg.
Blockchain is here to stay and those who do not adopt the new technology will soon be left behind. Brilliantly, blockchain has managed to simultaneously bridge major gaps in transparency while tackling data security and enhancing operational efficiencies which will extend soon into the very way we do business and lead our digital lives. To say that this is the next industrial revolution is not a hyperbole.

Lenin Perumalsamy, Senior Manager – Hedge Fund Solutions, Maitland

Maitland is licenced as required for the services it offers. For further information on the licence permissions applicable to your jurisdiction please visit our website at www.maitlandgroup.com. The information and opinions herein are for information purposes only. They are not intended to constitute legal, financial or other professional advice, and should not be relied upon as such or treated as a substitute for specific advice relevant to particular circumstances. Maitland as a group or any of its member firms or affiliated entities accepts no responsibility for any errors, omissions or misleading statements in this publication, or for any loss which might arise from reliance on the material. No mention of any organisation, company or individual, whether on these pages or not, shall imply any approval or warranty as to the standing and capability of any such organisations, companies or individuals on the part of Maitland. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.

©2018 funds europe