Asset managers behind the blockchain curve

Asset managers behind the blockchain curve

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Only a handful of asset owners and fund managers have initiatives underway to support blockchain, a State Street study finds, despite most expecting the technology to be widely adopted across the investment industry.

The distributed ledger technology, which underpins bitcoin, is a secure transaction ledger database shared by all parties in a distributed network.

It records and stores every transaction that occurs in the network, creating an irrevocable and auditable transaction history.

Interest has soared over the past 12 months, as companies spanning a myriad of sectors, particularly banks and exchanges, seek to explore the benefits offered by the innovation.

State Street’s study finds that 74% of asset owners say they believe blockchain will achieve the scale needed for adoption. 

Despite asset owners’ optimism, 48% said they don’t know enough about it, and asset managers are even less confident, with 78% noting that they need more education.

“A majority of institutional investors are well aware that blockchain, an ‘emerging technology,’ could become an everyday application in the near future,” said Antoine Shagoury, global chief information officer at State Street. 

“What’s clear from our research is a lack of readiness and uncertainty for how to best plan for this disruption, and a need for more education.”

The majority of respondents polled agreed that blockchain will have the greatest impact on IT departments.

Additionally, 81% of asset managers agree that the adoption of blockchain will equally disrupt their own jobs on investments teams.

Last week, a J.P Morgan research note looked at the potential blockchain benefits for the asset managers.

Gurjit S Kambo, equity analyst and author of the report, said the sector faces pressure to lower fees for investors, but blockchain could help by passing efficiency gains in fund admin costs.

"Banks and exchanges appear to be ahead of the curve and are taking a more pro-active role relative to the asset management industry, although certain asset managers have started to explore the implications of Blockchain," said Kambo.

"We estimate 36% of UK asset management industry costs relate to middle/back office functions, which may benefit from blockchain.

"Assuming that 25% of such costs could be reduced implies industry savings of £1bn (9%), which could offset fee pressure," he added.

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