Northern Trust has launched the first deployment of blockchain technology for the private equity market.
The Chicago-based asset manager worked with IBM to build a blockchain solution for managing the administration of a private equity fund managed by Unigestion, a Geneva, Switzerland-based asset manager with $20 billion in assets under management.
The technology is designed to deliver increased efficiency, security and transparency. It provides real-time insight and transparency to all parties, including the fund managers and investors. It is also designed to support compliance with current, local regulations and permits regulatory access when required.
“Current legal and administrative processes that support private equity are time consuming and expensive,” Peter Cherecwich, president of Corporate & Institutional Services at Northern Trust, said. “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.”
The solution allows the fund to transfer ownership stakes and be managed, serviced and audited on a transparent, secure platform. Initially, Northern Trust will make the solution available to clients on a selective basis.
“Blockchain is an ideal technology to bring innovation to the private equity market, allowing Northern Trust to improve traditional business processes at each stage to deliver greater transparency and efficiency. IBM collaborated with Northern Trust to build a powerful new enterprise solution using blockchain for the private equity industry,” Bridget van Kralingen, senior vice president of IBM Industry Platforms, said.
The solution is based on the open source Linux Foundation Hyperledger Fabric.
“Northern Trust anticipates substantial opportunities to bring improvements to the private equity market by using blockchain technology. This is an important first step to connecting participants much more effectively, including investors, managers, administrators, regulators, advisors and auditors,” Justin Chapman, global head of market advocacy and research at Northern Trust, said.
The fund is domiciled in Guernsey, where Northern Trust has offered a wide range of financial services since 1972.
“Guernsey has been at the forefront of innovation in the financial industry for many years. As a jurisdiction we continually monitor new technologies, support businesses in developing ground-breaking new ideas and provide a supportive environment where products can not only flourish but be first-to-market,” Chief Minister of Guernsey Gavin St Pier said. “The fact that this pioneering solution to the private equity market has been domiciled in Guernsey, and that Northern Trust has collaborated with IBM to provide a secured cloud solution with a high level of cryptography to protect investor data, shows the commitment of Government to being at the cutting edge of financial services technology.”