The solution, FNZ ChainLink, uses blockchain technology to replace thousands of copies of transaction and holdings, with a single source that is universally accessible. The developer said the technology would vastly reduce cost, complexity and risk in back-office operations.
The software’s launch was collaborated on with fund managers including Aberdeen Standard, Equity Trustees Fund Services, Kames Capital, Legg mason and Merian Global Investors.
“The global fund industry today relies on a plethora of peer-to-peer connections between investors, managers and platforms to effect basic fund activities such as trading, settlement, transfers, distributions and reconciliations,” Phil Goffin, head of innovation at FNZ said.
“None of these transactions are synchronised in real-time. Everyone has a different view of ‘the truth’, that often persists for days and months, leading to errors and exceptions, high back-office costs and risk for all participants.”
FNZ ChainLink creates the main legal register for the fund and all associated transactions directly into blockchain, making it simultaneously accessible to platforms, managers, transfer agents, fund accountants and custodians.
FNZ noted the tool eliminated the effort of reconciliations along with enabling real-time ‘delivery v payment’ settlement of trades and real-time fund transfers.
ChainLink went into production in March, initially with funds from Equity Trustees, Host Capital and Tutman distributed via the Aviva UK IFA and D2C platforms.
The company is now working to extend the software across a range of UK investment platforms and asset managers.
“In initially bringing this to market, particularly in the early stages of production operation, we have worked with FNZ-powered platforms and those asset managers for whom FNZ is the transfer agent,” Mr Goffin said.
“However, FNZ ChainLink is an open-market solution, based on open-source Hyperledger Fabric. We are working with a number of transfer agents, asset managers and platforms that aren’t FNZ-powered to ensure the benefits are shared by the whole industry.”
Adrian Durham, FNZ chief executive and founder, said that FNZ processes, on average, half a billion pounds sterling in mutual fund orders every day in the UK, and over a billion pounds on peak trading days.
“We are committed to lowering cost and risk, not just for FNZ, but for the entire industry,” Mr Durham said.
“We also plan to evolve the nature of managed funds themselves, enabling innovation in how asset managers deliver solutions for retail investors.”