Blockchain Technology Offers Operational Upgrades for Asset Managers
Asset managers are exploring blockchain and tokenization to modernize operations and meet the needs of new investors. Current practices are outdated, relying on manual processes and fragmented systems, which lead to inefficiencies like mistakes and delays.
Modernizing Fund Infrastructure
- Investment firms often use outdated infrastructure, with investor records in spreadsheets and capital calls via email.
- Blockchain can standardize workflows, creating a shared permissioned ledger for all stakeholders.
- Smart contracts automate capital calls and distributions, reducing errors and increasing transparency.
- Tokenization allows for automated settlement and real-time tracking of investments.
The Next Generation of Investment Vehicles
- Tokenized private credit funds, such as those by Apollo and Franklin Templeton, are emerging, enabling seamless cross-blockchain transactions.
- BlackRock's tokenized money market fund has exceeded $2.5 billion AUM in its first year.
- These products facilitate fractional ownership and enhance accessibility compared to traditional structures.
- Innovative strategies like on-chain yield vaults are being developed to automate investment execution directly on the blockchain.
The Time to Build Is Now
- Asset managers can retain their core competencies while adopting modern technologies.
- Blockchain offers a solution to streamline operations and reduce risks without threatening private markets.
- First movers are demonstrating the potential, urging others to adapt or risk obsolescence.