American financial services firm Northern Trust and IBM are pioneering the use of blockchain technology to help transform private equity administration.
IBM said although returns in private equity can be lucrative, its supporting infrastructure hasn’t seen much of innovation of late, especially when investors are looking at high levels of security, transparency and efficiency.
Northern Trust and IBM claim to have bridged the gap, taking the Hyperledger Fabric as the basis to create a new blockchain or distributed ledger solution that is rich in security features.
Northern Trust corporate & institutional services president Peter Cherecwich said: “Current legal and administrative processes that support private equity are time consuming and expensive.
“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 first deployment of the blockchain technology by Northern Trust was done for managing the administration of Swiss asset manager Unigestion-managed private equity fund.
IBM Industry Platforms senior vice president Bridget Van Kralingen said: “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.
“Based on the Hyperledger Fabric and secured by IBM Blockchain’s high security business network, IBM collaborated with Northern Trust to build a powerful new enterprise solution using blockchain for the private equity industry.”
Real-time insight and transparency are claimed to be delivered by the blockchain network to all parties from fund managers to investors besides enabling regulatory access when needed.
Primarily, the blockchain network has been created to back up compliance with existing, local regulations while keeping both government and regulator informed throughout the development stages.
The blockchain solution enables the fund on a transparent platform to move ownership interests and make them managed, serviced as well as audited during the lifecycle of the investment. Participants get access to the platform through secured means.
The blockchain will be initially available to clients on a selective manner as per Northern Trust.
Image: New blockchain services from IBM help developers create and manage blockchain networks to power a new class of distributed ledger applications. Photo: courtesy of IBM.