Unigestion has adopted a blockchain to administer one of its private equity funds in a bid to increase the efficiency, security and transparency of the process.
The blockchain allows the fund to transfer ownership stakes, and be managed, serviced and audited throughout its lifecycle. Users including investors, managers, administrators, regulators, advisors and auditors can access the platform securely, and it gives real time updates when relevant to all connected parties.
The platform was developed for the Swiss asset manager by fund administrator Northern Trust, in collaboration with software provider IBM.
“Current legal and administrative processes that support private equity are time consuming and expensive. A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes,” said Peter Cherecwich, president of corporate and institutional services at Northern Trust.
The Unigestion fund is domiciled in Guernsey and the local regulator was consulted during the development process. The blockchain supports compliance with current, local regulations.
What is blockchain?
A blockchain is a digital ledger containing cryptographically encoded blocks of data in a chain. A block of data depends on the blocks before it, with information shared between all parties. It also incorporates so-called smart contracts, which are programed to generate instructions, such as payment, once conditions are met.
They enable various parties to see and swap information in almost real time and for this information to be updated instantaneously. They can also make and verify transactions on a network without a central authority or clearing house, and without the need for intermediaries.
It is impossible to manipulate the data because it is not stored in one place.
The launch of the first private equity fund to operate using a blockchain – and accept investment only via digital currency – was delayed by a month due to a crackdown on Chinese crypto accounts, as reported by pfm.