Custody bank Northern Trust has laid claim to a pioneering application of a blockchain platform developed by tech giant IBM in the private equity market.
Chicago-based Northern Trust deployed the distribtued ledger system in collaboration with IBM, the financial company stated in an announcement today. The blockchain, based on the open-source Hyperledger Fabric, is being used to manage the administration of a private equity fund run by Geneva-based Unigestion.
The blockchain was developed in a compliant-ready and regulator-approved process with both the government and regulator kept abreast of its development through the stages.
Pointing to blockchain’s potential to bring substantial improvements to the private equity market, Northern Trust’s global head of research and market advocacy, Justin Chapman, stated:
This is an important first step to connecting participants much more effectively, including investors, managers, administrators, regulators, advisors and auditors.
The blockchain network enables investors of the private equity fund to trade their stakes in transactions among themselves, instantly. Further, investors will gain real-time insights in price changes in a system that records documents and details related to transactions in the fund. Regulators will also gain access to the information on the distributed ledger.
For now, the blockchain solution allows for transferring ownership stakes and allows the fund to be “managed, serviced and audited throughout [its] investment lifecycle.” Recognized participants will be able to securely access information that Northern Trust deems as the “one version of the truth”.
The chosen fund is based in Guernsey, a British Crown dependency in the Channel Islands, where authorities approved the use of blockchain technology.
In its initial rollout, the Chicago-based fund administration company and custody bank adds that it will choose clients for the blockchain solution on a selective basis, to begin with. The company also says it will look to explore other solutions of the blockchain solution in other asset classes and jurisdictions, based on the insights gained and the success of its newly launched platform.
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