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Technology company Calastone said blockchain, which is a giant online ledger, could revolutionise the processes involved in buying and selling funds, generating large savings for investors in the process.
It estimated that based on daily trade volumes of funds in the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia, £1.9bn — or $2.7bn — in savings was possible.
Ken Tregidgo, deputy chief executive of Calastone, said significant cost savings could be made by using distributed market infrastructure. For each transaction, different companies, ranging from transfer agents to asset managers, often have to input the same information, which is time-consuming and can be prone to errors.
Calastone calculated the potential cost savings of moving to distributed and mutualised market infrastructure by using data from a Deloitte study on fund expenses. By stripping out those costs that are traditionally incurred during the buying and selling process, but could be moved to blockchain, it calculated potential savings.
There are several initiatives investigating how blockchain can be used in the fund industry, ranging from settling transactions to trading securities.
The UK government recently set out an ambition to create a blockchain-enabled digital fund that would use distributed ledger technology to streamline back-office fund administration functions in a bid to increase speed and reduce cost.
Full article on Financial Times (subscription required)