Some of the UK’s biggest fund management firms are collaborating on a blockchain project that has the potential to eliminate millions of pounds in trading costs. According to an FT report, Schroders and Aberdeen Asset Management are working with Columbia Threadneedle Investments – which currently manages north of £320bn in assets – on the distributed ledger project.
According to statements from some of the parties involved, Aviva Investors and Henderson Global Investors are also participating. This project is also being developed with the help of several unnamed fintech firms, as well as assistance from KPMG, a global consulting outfit.
The firms will be examining how blockchain tech can be utilized to speed up the trading of illiquid securities among UK fund houses. The current process can take several days and the rapid settlement offered by blockchain-based trading systems is a very enticing proposition.
This type of settlement system would also eliminated the need for intermediary clearing entities such as large banks.
While major banks have already begun to experiment with blockchains, asset management firms have been slow to join the fintech movement. According to Amin Rajan, an executive from Create Research, blockchain technology is still in its nascent stages and that is one of the reasons why fund managers have been very cautious of it:
“Asset managers are wary of transformational changes, since they are dealing with other people’s money. Systems failures can cause huge reputational damage,”
Blockchain and Bitcoin are very frequently used synonymously, and due to all the bad press surround the digital currency, many fund managers have chosen to stay away from anything related to it.
Regardless of the bad press, BlackRock, the largest asset management firm in the world, is also keeping a close eye on blockchain developments.
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