Northern Trust has engaged with IBM on the commercial deployment of blockchain technology for the private equity market.
Northern Trust has deployed the system at Unigestion, a Swiss asset management firm, with the aim of addressing efficiency, security and transparency failings in the administration of traditional private equity funds.
The blockchain network, built on the Hyperledger fabric, provides real-time insight and transparency to all parties, including the fund managers and investors as well as allowing regulatory access when required. It was developed in concert with Government and regulatory authorities in Guernsey, where the fund is domiciled.
“Northern Trust anticipates substantial opportunities to bring improvements to the private equity market by using blockchain technology,” says Justin Chapman, global head of market advocacy and research at Northern Trust. “This is an important first step to connecting participants much more effectively, including investors, managers, administrators, regulators, advisors and auditors.”
The blockchain network allows the fund to transfer ownership stakes and to be managed, serviced and audited throughout the investment lifecycle on a single platform offering “one version of the truth” to participants granted access.
“Current legal and administrative processes that support private equity are time consuming and expensive,” says Peter Cherecwich, president of corporate & institutional services at Northern Trust. “A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes. Northern Trust’s solution is designed to deliver a significantly enhanced and efficient approach to private equity administration.”
He says the firm will offer the solution to other clients and explore deployment into other asset classes and jurisdictions.