First real blockchain enabled fund distribution | KPMG | SG

First real blockchain enabled fund distribution becomes a reality as investors successfully purchase shares

First real blockchain enabled fund distribution

Investors have successfully purchased fund shares through FundsDLT, a blockchain-powered platform for fund managers.

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For the first time in the fund industry, investors have successfully purchased real funds’ shares with real cash, through a blockchain-powered platform for fund managers, called FundsDLT. FundsDLT was developed as a collaboration between KPMG in Luxembourg, Fundsquare (a subsidiary of the Luxembourg Stock Exchange) and InTech (a subsidiary of POST Group).

“We believe these are the first fund sales using a blockchain-based platform, which were carried out in the world’s second largest market for net assets under management,” said Eamonn Maguire, global leader for KPMG’s Digital Ledger Services. “It is a major breakthrough in validating blockchain as a technology to enable funds trading and has the potential to reshape the investment industry, bringing important commercial benefits to industry participants.”

The FundsDLT platform enables asset managers to sell funds directly to investors, thereby dramatically reducing the cost of administration and the time needed to process transactions. Orders are submitted directly to the FundsDLT smart contract platform and the information is immediately and simultaneously transmitted, using blockchain technology, to all of the parties involved in the transaction.

In addition to reducing administration time, the platform streamlines compliance procedures so that customers will no longer have to be verified by each party involved. This means that the time between an investor making a decision and a transfer agent executing it can be reduced to just hours – and in the not-too-distant future, seconds.

The first FundsDLT share purchases were of funds of Natixis Asset Management, a leading affiliate of Natixis Global Asset Management, which had announced its intention to be the first asset management firm to use the FundsDLT platform, taking advantage of blockchain technology to enhance distribution across several of its business lines.

This project reflects KPMG’s business case driven approach to blockchain and demonstrates how KPMG is collaborating to help enable transformation for individual clients and for markets in general. It paves the way for asset managers in markets outside of the EU, including North America and Asia Pacific, who may potentially benefit from the FundsDLT approach as they explore their options with blockchain technology.

On the implications to stock exchanges, Chia Tek Yew, Head of Financial Services Advisory, KPMG in Singapore, said: “It is no longer a question of if fund transactions can be completely executed on the blockchain, but a reality that bourses need to grapple with. The role of the Exchange as a clearing and settlement player, as well as a custodian for funds bought and sold in their market, will change. Plans around evolving its business model in light of this development should be made, if not already underway.”

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