Calastone, the global fund transaction network has announced it will be moving its entire global network, more than 1,700 clients to blockchain which they believe could save £3.4 billion in fund distribution costs.
The move to blockchain will take place in May 2019 via the company’s new Distribution Market Infrastructure (DMI) which is being seen as the world’s first and one of the industry’s biggest transfers.
According to Calastone “The DMI creates a global funds marketplace, in which buyers and sellers can connect and transact. It creates an ecosystem within which the trading, settlement and servicing of funds is friction free, eliminating ever-growing risk and costs for fund managers and investors, embedded within the current system.”
The company believes that as the fund industry has a high cost of distribution which is transferred over to the investor. This is in part due to the traditional way funds are traded which Calastone believes “doesn't work in the interest of investors”.
The DMI tackles this issue head on by creating a platform that digitalises the trading, settlement and distribution of funds by “bringing together all market participants and equipping them with the tools to innovate, grow and differentiate.”
Calastone clients can use the DMI to leverage the benefits of technology through a range of new services and capabilities, reducing risk, cost and at the same time improving investor experience.
Julien Hammerson, Calastone’s CEO, said: “The launch of our DMI marks an exciting step for the industry in accelerating the digitisation of the funds sector and is a significant achievement for Calastone. The migration of our global network is the culmination of years of hard work and continued investment in innovation.
“Funds remain a vital investment vehicle, though remain hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable. Through leveraging blockchain technology, the DMI transforms the way in which funds are traded, enabling an investment management community that can meet the changing needs of investors.”
Calastone has calculated the potential cost savings of moving to a distributed and mutualised market infrastructure using data from Deloitte’s study 'Europe’s fund expenses at a crossroads; The benefits of mutualizing the cost of distribution'. Alongside data from the 2018 Investment Company Fact Book. Calastone’s calculation has been applied to mutual fund assets under management for the global funds market, excluding the US.
