From early ‘what is blockchain?’ days to the current landscape where digital distribution is poised to redefine the investment fund industry, explore some milestones in the ongoing digital transformation of fund distribution over the past eight years.
Set to move to the next level following the completion of our acquisition by Deutsche Börse Group, it's a fitting time to reflect on the journey of FundsDLT and where we are heading now.
Discover a story deeply rooted in technological advance and long-term strategic vision in the fund distribution sector. This account offers a brief look at the shaping of a digitally empowered future for funds. From the evolution of traditional processes to innovative digital distribution models, let’s look at how it happened and is still happening, while also casting an eye towards future trends and developments that will drive the digital transformation of the fund industry.
2015-2016: Blockchain for finance?
In 2015, blockchain was emerging from the shadows of cryptocurrency, intriguing some forward thinkers of the financial services sector. This period was crucial for conceptualising how DLT could be applied to investment funds and asset management, addressing transparency, efficiency, and costs. We explored the opportunities for fund distribution in this pioneering article from 2016, sparking interest among industry leaders.
Concurrently, the project that would evolve into FundsDLT began, poised to harness distributed ledger technology for revolutionising fund distribution. This was the inception of a journey towards modernising a traditionally slow-moving sector.
2017-2018: Rising momentum
This period marked a shift from exploratory ideas and during these years blockchain's practical applications in finance began to crystallise. The concept of blockchain as a game-changer and foundational technology was gaining ground, promising to ease access to investment funds.
FundsDLT transitioned from concept to reality, aiming to reshape fund distribution through DLT. 2017 was a landmark year: the company launched the beta version of its platform and executed the first blockchain transaction for fund subscription in July. This practical application of blockchain in the financial sector demonstrated the potential of DLT in revolutionising fund distribution.
2019: Tokenisation and FundsDLT leads the way
By 2019, tokenisation was no longer an abstract idea for financial services but a tangible tool that had the potential to reshape the investment fund landscape. FundsDLT emerged as a front-runner, demonstrating how its platform could create more efficient, transparent, and cost-effective fund distribution models. The platform offered glimpses of a future where digital distribution would replace outdated practices.
2020-2021: Digital transformation accelerates
The pandemic accelerated the digital shift across all sectors, including financial services. Regarding fund distribution, the sector began to more earnestly explore digital alternatives for maintaining operations amidst disruptions.
April 2020 marked a significant milestone as FundsDLT transitioned from a project to an official corporate entity. Also in that same year, the company finalised Series A funding. This round of financing was supported by Clearstream, Credit Suisse Asset Management, the Luxembourg Stock Exchange, and Natixis Investment Managers. These strategic shareholders enabled FundsDLT to move from a private to an industry-wide initiative and to continue scaling up its operations.
In 2021, FundsDLT obtained the necessary regulatory approvals from the CSSF. This was a major milestone that allowed operations to commence. It was granted licenses to operate as a Specialised PSF, Investment Firm and Central Administrator and was authorised to operate in the Cloud. As a result, the company started onboarding its first clients.
2022: Mainstream acceptance begins
2022 witnessed the broader acceptance of blockchain and DLT in financial services. Other initiatives around digitalisation, blockchain and tokenisation in finance and investment had begun and as a result the industry as a whole was more ready to change and begin the transition to wider adoption.
FundsDLT, now a mature platform extended its services, integrating advanced features. The industry began recognising the need for cohesive long-term digital strategies rather than piecemeal upgrades and changes.
2023: The start of market-wide adoption
At the end of 2023, the fund industry stood on the brink of a significant transformation, with next-generation fund distribution at its core. DLT and tokenisation, once novel concepts, were now integral to this shift. FundsDLT exemplifies this transition, representing the first significant wave of comprehensive digital change in fund distribution.
The company's commitment to security and compliance was exemplified by its successful SOC 2 Type II assessment. Its reputation as a leader for robust, next-generation solutions helped it to secure mandates from prestigious clients in Asia.
Additionally, a major development occurred in August with the acquisition of FundsDLT by Deutsche Börse Group (and the completion of this acquisition in January 2024), positioning the company within a larger financial ecosystem. FundsDLT now operates within the Group’s Clearstream Fund Services business segment while retaining its separate legal identity and independence.
This step enables the technology to move to an industrial scale, while at the same time complementing and strengthening Clearstream’s current fund processing and distribution offering.
2024 and beyond: The future of fund distribution
The journey from 2015 to the present highlights a crucial phase in fund distribution's digital evolution. FundsDLT has not only mirrored this shift but has actively propelled it. The industry is at a tipping point, moving from initial adoption to widespread implementation of DLT and tokenisation.
However, there is more to come. It is crucial to recognise the evolving landscape of fund distribution, especially with the implementation of ELTIF 2.0 this year. This opens a significant gateway for retail access to private assets, an area where FundsDLT is actively engaged and contributing to the industry's evolution. The potential in this segment is significant and FundsDLT is strategically positioned to harness these opportunities, offering robust solutions that align with regulatory, investor and business needs.
Further enriching our service offerings, we are excited about numerous upcoming integrations of other service providers within the FundsDLT ecosystem. These collaborations are designed to enhance the FundsDLT product suite, ensuring a seamless, interconnected experience for our clients. By forging partnerships with leading service providers, FundsDLT aims to create a comprehensive ecosystem that addresses the diverse needs of fund distribution, from compliance to investor engagement.
Innovation remains at the heart of our operations, and in line with this ethos, FundsDLT is exploring the potential of building infrastructure on public blockchains. This exploration signifies our commitment to staying ahead of technological advancements and adapting solutions.
Additionally, FundsDLT is dedicated to developing new products that cater to the evolving demands of the market. Our team is actively working on innovative solutions that not only meet current industry standards but also anticipate future trends. These new products are being designed with a focus on enhancing user experience, optimising operational efficiency, and providing advanced functionality to our clients.
With a relentless forward-looking approach, we are excited to contribute to shaping the future of fund distribution, underpinned by technological innovation and a deep understanding of the industry's needs.
