Northern Trust, in collaboration with IBM and several other stakeholders, has launched a commercial blockchain solution for the private equity market.
The solution will be used for managing the administration of a private equity fund managed by Unigestion, a Geneva-based asset manager with $20 billion in assets under management.
The fund is domiciled in Guernsey, where use of blockchain technology has already been approved by the authorities.
Peter Cherecwich, president of corporate and institutional services at Northern Trust, said: “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.”
Based on the open-source Linux Foundation Hyperledger Fabric, the solution is intended to provide insight and transparency for fund managers and investors, while also allowing for regulatory access, when required.
Northern Trust collaborated with Unigestion, while keeping the government and regulators informed, to create a private equity network that supports compliance with current and future regulatory requirements.
Emma Bailey, director of the investment supervision and policy division of the Guernsey Financial Services Commission, said: “Northern Trust has engaged with us as regulators from the start and we are pleased with the level of openness and interaction.”
She added: “This is another example of the Commission’s approach to innovation in the Bailiwick’s financial services industry.”
The solution will use the IBM Blockchain business network, which provides hardware-assisted cryptography and key management, to protect investor data.
It will allow the fund to transfer ownership stakes that can be managed, serviced and audited throughout the investment lifecycle. The use of a blockchain means all participants that gain access will work off of one version of the truth. Initially, access will be on a selective basis.
Arvind Krishna, senior vice president of Hybrid Cloud and director of IBM Research, 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.”
Guernsey’s chief minister Gavin St Pier, commented: “Guernsey has been at the forefront of innovation in the financial industry for many years. As a jurisdiction we continually monitor new technologies, support businesses in developing ground-breaking new ideas and provide a supportive environment where products can not only flourish but be first to market.”
He added: “The fact that this pioneering solution to the private equity market has been domiciled in Guernsey, and that Northern Trust has collaborated with IBM to provide a secured cloud solution with a high level of cryptography to protect investor data, shows the commitment of Government to being at the cutting edge of financial services technology.”
