We are living and moving in a digital age that is driven by disruptive technologies and no wonder blockchain is one of them. Blockchain is a hot buzzword in the wealth management industry right now and first came to light in 2008 when a mysterious figure named Satoshi Nakamoto presented the public ledger system that tracks Bitcoin transactions and eliminates the double-spending problem using the distributed ledger concept.
Since then the blockchain has emerged as the most revolutionary and disruptive technology that can transform the entire investment management industry thanks to its overreaching benefits like reduced costs, increased security, and greater efficiency.
The other distinctive features of blockchain include the ability to speed up the trading, settlement and clearing process, easy client onboarding, smart contracts, and streamlining fund portfolio management. Let’s discuss the usage of blockchain technology in streamlining fund portfolio management and what unique capabilities it brings for wealth managers for active portfolio management.
In the past, traditional investment managers have struggled badly when it comes to monitoring, updating, and distributing multiple portfolio models based on information received from diverse investment platforms.
However, with the arrival of distributed ledger technology or blockchain, the asset managers can easily communicate with each other and clients about the portfolio changes in real-time. The highly organized data structures in DLT also enable the portfolio managers to provide the real-time view of the individual account performance, cash flows and drifting data to the clients.
Investment managers can create and maintain a model portfolio that they can share with the subscribed brokers or clients. With the usage of blockchain and other cutting-edge technologies like AI, portfolio customization and other account level constraints can also be applied by the portfolio managers.
What this all would essentially mean is that wealth managers with the help of blockchain can easily share the trades, account transactions, portfolio risk, drift data, and real-time portfolio performance with the clients or investors, which will bring greater transparency in the entire investment management system.
The number of efforts or reconciliations that are required in traditional centralized investment systems for securing investment data can also be minimized with a secure and distributed ledger in the blockchain.
Tokenization is another praiseworthy feature of blockchain that allows new ways of fundraising (through ITOs) as well as trading of digitally representing physical assets. What this would do is create a hybrid portfolio of real and digital world assets.
The tokenization feature of DLT or simply blockchain will also bring a seismic shift in terms of democratizing investment, lowering administrative costs, and driving diversification in fund portfolio management. A number of Fintech companies are looking to develop such investment solutions that can provide alternative ways for effective fund portfolio management.
For instance,DCI Ecosystem is one such blockchain-based investment ecosystem that in working on bringing together the old and modern investment models together. DCI ecosystem leverages distributed ledger capabilities of blockchain along with the support of AI, Machine Learning (ML), and Robo-advisory services to bring a much-needed higher degree of automation in fund portfolio management.
DCI ecosystem also has high liquidity as it enables the trading of ostensibly illiquid real-world physical assets, i.e. real estate, through the means of tokenization and cross-chain transactions. DCI also offers a complete 360-degree view of the private and institutional portfolio.
So, in conclusion, the application of the blockchain in fund portfolio management is highly effective as it brings a whole range of benefits like real-time settlement models, easy client onboarding, exchange of money and value, automated investing, and rebalancing of portfolios.