Northern Trust has joined up with IBM in a commercial deployment of blockchain technology for the private equity market.
Both parties, along with other stakeholders, have combined to build a distributed ledger offering based on the Hyperledger Fabric.
The platform will be used to administer private equity funds managed by Unigestion, a Geneva-based asset manager with $20 billion in assets under management.
The resulting network aims to provide real-time insight and transparency to all parties including fund managers, investors and regulators.
The development is in response to an apparent lack of innovation in the private equity space, where investors are seeking greater transparency, security and efficiency.
“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,” said Arvind Krishna, senior vice president of Hybrid Cloud and director of IBM Research.
“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.”
In addition the platform aims to allow the fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform offering ‘one version of the truth’ to participants who gain access via secured means.
Northern Trust will only offer the solution to clients on a selective basis.
“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.”
Recent research on blockchain technology from Synechron found that almost 25% of senior-level financial services professionals have said their firms are waiting for regulatory guidance before taking action on blockchain technology.
In addition, earlier this month, the European Securities Market Authority (ESMA) suggested legal issues that stretch beyond those contained in financial regulation could affect the deployment of blockchain technology.
Northern Trust and IBM target private equity with blockchain deployment
Northern Trust and IBM’s blockchain offering is aiming to increase transparency and efficiency in private equity administration.