A Month Ago

FundAdminChain (FAC) is looking to massively reduce the cost of administration in the asset management sector, thus making funds better value for their customers, which ought to improve fund performance at the same time.

FAC is using the open-source Blockchain platform, R3’s Corda, with which FAC would appear to have very close links. The new CEO of FAC, Brian McNulty, was a former managing director at R3. One of the advisors for FAC is the founder of R3, David Rutter, formerly CEO of the electronic broking division of ICAP- the world’s biggest inter-dealer broker. 

FAC, which will be based in London, claims the asset management industry is over $100 trillion. It is building a Blockchain-powered platform giving access to IFAs/distributors, transfer agents, custodians, and other intermediaries, who buy and sell units in a fund, to one common database which has military-grade security. FAC claims that for a fund manager who has £100 billion under management, its platform will save the fund manager over £30 million a year. The cost of registry, depositary, and transactions will be 0.5 basis points as opposed to the current standard 5 basis points, and FAC’s McNulty has confirmed that FAC is in discussion with 25 asset management firms ready to use its platform.

There are other companies also using Blockchain technology to reduce the costs for asset managers such as AMUN, Calstone, and Funds DLT. The potential savings of using Blockchain technology are massive, at $3.4 billion a year, according to Calstone which processes over $170 billion transactions a month.

FundsDLT was developed by Fundsquare, a subsidiary of the Luxembourg Stock Exchange, carried out its first test in 2017, and now boasts a number of fund managers using its platform including Credit Suisse, Banco Best, in Portugal, and AcomeA SGR, in Italy.

Lowering administration costs is very much a focus for fund managers as they continue to be pressurised by regulators to ensure that customers are “being treated fairly”, and because we are seeing new types of fund pricing being introduced:

zero-fee Exchange Traded Funds (ETF) 
low-cost funds with performance fees.

In 2019, in a report from Deloitte on the asset management sector, State Street Global Advisors’ and Investment Company Institute’s data estimated that, globally, ETFs could grow to $25 trillion by the end of 2025, up from $4.8 trillion in 2018! This growth is partly being driven by the advent of “zero-fee” ETFs, which means that asset managers have a massive incentive to crush costs as they are, in effect, subsidising some funds in order to attract additional assets under management. 

Deloitte, in its report, also highlighted Allianz Global Investors have been one of the early adopters of a performance-based fee model in the United Kingdom. Investors are charged a base fee of 20 basis points and an incentive fee of 20% of any performance over the fund’s stated benchmark.

Another way that Blockchain technology is being used in the asset management sector is the tokenisation of funds, which Deloitte summarised as: “Tokenisation allows the creation of a new financial system- one that is more democratic, more efficient and vaster than anything we have seen”

Tokenisation of an existing fund enables it to be more relevant and suitable for younger fund buyers i.e. generation X and millennials, who...


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Asset Management
Blockchain
Investment Funds

2 Months Ago

Blackrock, the biggest asset manager in the world, with over $6.28 trillion under management, is capitalised at $72.billion and, during the quarter ending 31st March 2019, generated $3.246 billion of revenue.

Facebook is valued at $550 billion and, as at March 2019, it had over 2.38 billion users and generated $15.08 billion of revenue. Blackrock only has $6.49 billion of net cash and short term investments, compared to Facebook’s $41.12 billion of cash and short terms investments. 

Despite Blackrock’s size and global reach - having offices in over 100 countries- it is still very dependent on the Americas, as they make up 62% of the firm’s funds under management. Compare this to Facebook, where it is estimated that more than half of the US population (169.5 million people) use Facebook out of its 2.3 billion user-base. It is obvious that Facebook not only has greater distribution i.e. more direct clients that Blackrock, but Facebook has far greater penetration in faster-growing markets outside of the USA. 

Why is all this important? Well, quite simply, if you have the ability – cash and the type of global distribution and brand that Facebook has  - then even the biggest asset manager in the world needs to pay attention since Facebook has announced it wishes to launch an Exchange Traded Fund (EFT). The Facebook ETF will be based on Libra, which is a Digital Asset backed by a basket of currencies. Therefore it is not completely dependent on the fortunes of the US$, which it would be if it were backed by an asset that is priced in US$ (like gold), which is what the Editor of Forbes magazine is calling for.

Libra’s acceptance has received a boost from the third biggest economy in the world, Japan, as the Japanese Financial Services agency believes that Libra is unlikely to be a Cryptocurrency. It has stated that Libra will more likely be categorised “as general money transactions and remittances.”

The massive profits that fund managers have generated for years and their annuity style income (they earn a fee based on the funds that they manage, so having much greater visibility of their revenue) has meant that asset managers enjoy a high PE ratio. Blackrock’s PE is currently 16.8, although this pales into insignificance compared to Facebook’s current 23.35, as investors believe that Facebook is able to grow its revenue and profits faster than many other public companies!

If Facebook focuses more of its attention to asset management, and Libra is just the start of a series of products and services Facebook is going to offer its users, then traditional managers need to pay very careful attention. Facebook has both the cash and the followers to become a substantial asset manager extremely quickly, and also has massive exposure in parts of the world which are growing fast, and where its younger citizens are already digitally engaged!

 

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Asset Management
Cryptocurrency

6 Months Ago

Guy Hirsch, Managing rector of eToro U.S., sees the increased interest and investments in Digital Assets as a clear “generation shift."

He stated via press release: “we’re seeing the beginning of a generational shift in trust from traditional stock exchanges to crypto exchanges. At the heart of this change are the asset classes themselves.

Younger investors’ experience with the stock market has seen a great deal of loss of trust, with the fall of Lehman brothers...” One of the benefits of people investing in digital assets is that companies can know who their actual shareholders are and so have a relationship with them, and reward so offer them shareholder perks e.g. discounts off goods and services. This is almost impossible when shares are held as they currently are, in nominee structures.

Potentially companies could have no need for share registrars saving them money, as shareholders records can be updated in Real Time, which in turn would help regulators know who owns what which at the moment is impossible for a listed quoted company.

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Asset Management
Blockchain
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https://www.ccn.com/bitcoin-is-the-gateway-drug...illennials

7 Months Ago

There are many projects being implemented using Blockchain technology.

The creation of tokens, a new asset class, allows tokens, backed by equities, bonds, property, FX, commodities, etc. to be offered and traded potentially 24/7 in a digital fashion enabling asset managers to offer new types of funds. To date, the focus has been more about how technology is being used to reduce the onboarding costs of KYC and AML. Firms like Coinfirm and Blockpass can help with individuals, and if you are when dealing with corporates that require real-time ongoing KYC monitoring the Kompany are able to help. Blockchain technology can help to solve the problems of dispute resolution and improve the time it takes to solve discrepancies. The consensus-based nature of the technology means that updates cannot occur to asset records without agreement from all relevant parties.

Digital assets such as Security Tokens will also allow preauthorization checks before a trade is executed and even enable dividends and rental income on property funds to be paid based on the number of MINUTES an investor as held the assets. Both of these are impossible in today’s analog markets!


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Asset Management
Blockchain
Digital Assets
https://businessblockchainhq.com/business-block...-industry/