Fund distribution is in search of a serious and wide-ranging response to digital transformation challenges. Olivier Portenseigne, CEO of FundsDLT, sets out his vision and the benefits offered by the platform.
With a fund industry in transformation, what does FundsDLT bring to the market?
OP - Cost and margin pressures, changing investor expectations as regards investments and client service, as well as the drives for greater transparency and financial inclusion all need resolving.
However, with a few exceptions, only incremental and mostly disconnected steps focusing on a part of the overall picture have been taken to date, both within individual companies and in the wider fund industry.
With the rise of blockchain, or more correctly distributed ledger technology, some investment fund companies saw the potential of DLT as a catalyst for long-lasting, profound change across the entire financial industry.
The potential for change raised one often-asked question: who would benefit from the digital transformation of the fund industry?
We enable existing actors to better serve their clients and in particular the end investor.
From the beginning, FundsDLT has focused on enabling existing actors to better serve their clients and in particular the end investor. To take the example of a typical asset management company today, they do not know who their final investors are, at least in any great detail. We believe in providing simpler, easier access for all and enabling all companies in the fund distribution chain to better know and serve all investors.
In short, our vision is to support and simplify fund distribution through a digital market infrastructure promoting financial inclusion and savings. This means providing an infrastructure that will help all companies in the chain to grow and be in a stronger position for the future.
Are existing actors wary of this ongoing transformation? Do they see it as disruptive for their business?
OP - We position ourselves as technology provider and operator of a decentralized platform that is open to all actors in the fund industry. FundsDLT’s responsibility is to accept and manage members, administer the smart contracts, supervise standard APIs and oversee the technical infrastructure.
FundsDLT is not a replacement for existing actors in the distribution ecosystem. The platform that we are building assists these actors in delivering a better service in their businesses and supports them in multiple areas.
Firstly, there are the gains that can be realised by using blockchain to mutualize redundant activities existing at every layer of the fund distribution chain. This will mean that asset managers, distributors, asset servicers, and other companies can reduce costs, at a level of almost 70% via mutualisation and process efficiency.
Secondly, the need for transparency around data has become crucial. An improved market infrastructure offers a real-time view on share ownership, trade status and fund cash flows. Furthermore, a blockchain-based platform means that the data is continually verified, updated, and kept in sync through the consensus of all participants.
A decentralised, blockchain-based platform enables the mutualization of redundant activities existing at every layer of the fund distribution chain.
A real-time view of the fund market, its participants and investors results in a greater understanding of how these are bought and sold. The creation of improved products and services and new revenue streams will lead from this.
Ultimately, the purpose of all these steps is to simplify and open up access to greater numbers of investors via new distribution channels.
Your mission is “to deliver a market-leading platform”, what differentiates this from other initiatives?
We are led by a consortium of international strategic partners and leverage the culture and expertise of Luxembourg, as it is Europe’s leading investment fund centre.
OP - We see ourselves as built for the fund market and with the market. We are passionate, enthusiastic and motivated to make a difference and to have a positive impact through innovation. The emphasis is on common and shared goals and values across the distribution chain.
The FundsDLT solution was enlarged upon based on in-depth reflections of a user group composed of major fund industry firms. Now, we are led by a consortium of international strategic partners.
The international aspect is important, although we leverage the culture and expertise of Luxembourg as it is Europe’s leading investment fund centre. The four strategic partners cover a variety of market activities, including experience with building scalable market infrastructures, and importantly have established networks of funds distribution entities.
The investment fund industry is known for being behind the times when it comes to digital transformation. It is more than possible that legacy systems will continue to operate alongside a DLT ecosystem for some time as adoption gathers pace.
However, what we bring to the market – cheaper, faster, easier distribution for all – will facilitate DLT adoption.
The goals of the industry are to enable access for investors and to offer the products and services they need. FundsDLT brings trusted partners and industry expertise to help investment fund actors achieve these goals.