FNZ has partnered with a consortium of global fund managers including Aberdeen Standard, Equity Trustees Fund Services, Kames Capital, Legg Mason and Merian Global Investors to launch what it says is the world’s first production blockchain-powered market infrastructure for asset management.
The FNZ solution, ‘FNZ ChainClear’, leverages blockchain technology to replace the thousands of copies of transaction and holdings that plague the managed funds industry, with a single, secure, verifiable source of ‘the truth’, universally accessible by all parties. This vastly reduces cost, complexity and risk in back-office operations, that is ultimately borne by retail investors.
“The global fund industry today relies on a plethora of peer-to-peer connections between investors, managers and platforms to effect basic fund activities such as trading, settlement, transfers, distributions and reconciliations.” observes Phil Goffin, head of innovation at FNZ. “None of these transactions are synchronized in real-time. Everyone has a different view of ‘the truth’, that often persists for days and months, leading to errors and exceptions, high back-office costs and risk for all participants,” Goffin added.
According to FNZ literature, FNZ ChainClear uniquely creates the main legal register for the fund and all associated transactions directly into blockchain, making it simultaneously accessible to platforms, managers, transfer agents, fund accountants and custodians. It eliminates the effort of reconciliations, enables real-time “delivery vs payment” settlement of trades and real-time fund transfers.
FNZ ChainClear went into production in March 2019, initially with funds from Equity Trustees, Host Capital and Tutman distributed via the Aviva UK IFA and D2C platforms. After a month of operation, FNZ said it is now working to extend FNZ ChainClear across a wide range of UK investment platforms and asset managers.
“In initially bringing this to market, particularly in the early stages of production operation, we have worked with FNZ-powered platforms and those asset managers for whom FNZ is the Transfer Agent.” said Goffin. “However, FNZ ChainClear is an open-market solution, based on open-source Hyperledger Fabric. We are working with a number of transfer agents, asset managers and platforms that aren’t FNZ-powered to ensure the benefits are shared by the whole industry”.
FNZ processes, on average, half a billion pounds sterling in mutual fund orders every day in the UK, and over a billion pounds on peak trading days, according to FNZ founder and CEO Adrian Durham. “We are committed to lowering cost and risk, not just for FNZ, but for the entire industry. We also plan to evolve the nature of managed funds themselves, enabling innovation in how asset managers deliver solutions for retail investors,” said Durham.