Northern Trust using blockchain for private equity administration

Northern Trust using blockchain for private equity administration

A private equity fund run by Swiss-based asset manager Unigestion is using blockchain technology built by Northern Trust and IBM.

A statement on Wednesday said a “security-rich blockchain” is managing the administration of the Guernsey-domiciled investment vehicle.

Tech giant IBM and Chicago-based Northern Trust said the solution aims to boost efficiency, security and transparency.

Fund administration, a set of services underpinning traditional and alternative funds, is one area where blockchain could make an impact.

Accounting, portfolio valuation, fund pricing and shareholder record-keeping are some of the traditional admin services.

However these functions can be time consuming and costly. 

Clients have been calling for fee reductions and administrators have been reviewing infrastructure to reduce operational costs and meet regulatory requirements.

State Street, SS&C, BNY Mellon and Northern Trust are among the current leading players in the sector which has consolidated in recent years.

Meanwhile, the private equity industry remains notorious for being opaque and access to any data is difficult.

Blockchains, or distributed ledgers, are increasingly viewed by market players as a legitimate way to boost transparency, cut costs and streamline processes. 

Northern Trust and IBM added that their network provides real-time insight to the fund managers, investors and regulators.

In addition, the fund can use the technology to transfer ownership stakes which can be managed, serviced and audited throughout the investment lifecycle.

Initially Northern Trust will make the solution available to clients on a selective basis.

If successful, the technology could appeal to the wider private equity market.

“Current legal and administrative processes that support private equity are time consuming and expensive,” said 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.”

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