A New report published by ConsenSys claims that the blockchain could help to revolutionize the asset management industry. However, the report comes with a disclaimer; the industry has to be willing to change to reap the benefits that the blockchain has to offer.
Tokenization Could Revive the Sector
According to the report, the asset management sector has been undergoing a revolution for a while now. For instance, there has been growing pressure to cut back on the fees. Additionally, most investors in the sector have been moving from active to passive investing. As a result, this has led to consolidation in the sector with some experts predicting that it could shrink by over 30% in five years to come.
According to the report, this set of conditions has made the industry ripe for tokenization. With tokenization, asset managers can create new revenue streams through a secondary market for the asset management industry that has traditionally suffered from illiquidity. Additionally, it could help to reduce the cost of transactions by automating settlements using smart contracts.
ConsenSys gives the example of Mata Capital, a firm that manages real estate investment funds. The company teamed up with ConsenSys earlier this year to tokenize the shares of a real estate company using Ethereum’s blockchain. This platform is live and it is being used to fund a real estate development in Paris valued at $28.7 million. Thus far, it is the largest tokenization effort in the EU.
The Blockchain and Custodianship
In its reports, ConsenSys highlights various areas that could benefit from the blockchain in regards to custodianship. One notable firm that has been in this space for a while now is BNP Paribas. Since 2017, they have been operating a platform that offers better transparency and access for corporate events. ConsenSys is entering this space with an Ethereum-powered platform called Truset that aggregates security reference data.
However, it is interesting to note that ConsenSys only focuses on centralizes custody solutions such as Coinbase Custody as well as comparing the benefits of cold and hot storage. It does not talk about any decentralized custody solutions.
It could indicate that ConsenSys believes that decentralized custody solutions running on the Ethereum blockchain or other blockchains would be too unpalatable for risk-averse financial firms. ConsenSys is likely avoiding being seen as advocating for these solutions while trying to woo potential asset managers.
Disrupting Fund Administration Using Blockchain Technology
Fund management is a complex process that involves many back-end processes. These processes include KYC requirements. The processes are most ripe for automation compared to any other aspect of asset management.
According to the report, FundsDLT is currently a leader in this space. The company operates a platform that can manage various aspects of funds administration tasks including net asset value calculations, order processing, and onboarding.
In conclusion, the report calls for partnerships and collaboration in the asset management industry. It cautions that the only way to realize the potential benefits of the blockchain is for various parties in the sector to work together.
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