By Daniel Lanyon on Thursday 6 July 2017
Natixis Asset Management reveals its use of the much-hyped Distributed Ledger Technology.
Investors are now purchasing shares in Natixis AM’s funds through its blockchain-powered fund distribution platform for fund managers, Funds DLT, with further plans to role out the technology to robo-advice firms.
The DLT acronym refers to the broad technology underpinning the blockchain world, used most famously in the crypto currency Bitcoin. Distributed Ledger Technology allows for transactions to be carried out with, adherents claim, a very high degree of efficiency and low level of cost as well as in a manner making fraud highly unlikely.
This, they continue, will revolutionise the financial world and many institutions are currently investing in the space. Naysayers argue that any real world applications are a long way off.
Natixis recently announced its intention to be the first asset management player in the industry to use the Funds DLT platform by using blockchain technology across several of its business lines, taking advantage of great opportunities to enhance distribution mechanisms in the asset management industry.
FundsDLT is the result of collaboration between Fundsquare (a subsidiary of the Luxembourg Stock Exchange), InTech (a subsidiary of POST Group) and KPMG Luxembourg.
The platform enables asset managers to sell funds through a new distribution channel, while, the firm says, significantly reducing admin costs and the processing time. The successful execution means that, for the first time in the fund industry, investors are using a blockchain based platform to purchase real funds’ shares with real cash.
First, the investors use the FundsDLT mobile app to submit the standard subscription order for the shares. Via the API the order is transmitted to the FundsDLT platform and the information is immediately and simultaneously transmitted using blockchain technology to Natixis AM and the other parties involved in the transaction, each one having its own node on the FundsDLT blockchain.
The transfer agent – in this case CACEIS – is the first to act by confirming the transaction and logging it as “approved” or “declined”. Approval triggers the clearing and settlement processes: all of which take place on the Funds DLT platform.
The cash and payment process is handled using S-money (part of Groupe BPCE). Investors top up their S-money account with sufficient funds to cover the transaction before completing the order.
Said Fihri of KPMG Luxembourg said: “We are close to having an industrial product that could be used in different configurations: distributors, IFA, robo advisors and D2C.”