A group of asset managers have teamed up with fintech firm FNZ to launch blockchain-powered market infrastructure to track and record fund transactions.
The technology, named FNZ Chainlink, has been backed by Aberdeen Standard, Kames Capital, Legg Mason, Equity Trustees Fund Services and Merian Global Investors.
A statement said FNZ Chainlink will use blockchain technology to "replace thousands of copies of transactions and holdings that plague the managed funds industry, with a single, secure, verifiable source of ‘the truth', universally accessible by all parties".
This, they said, will reduce cost, complexity and risk in back-office operations that is "ultimately borne by retail investors".
Phil Goffin, head of innovation at FNZ, said: "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.
"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 a "main legal register" for the fund and all associated transactions directly into blockchain, which allows the groups, platforms, managers, transfer agents, fund accountants and custodians to access the records simultaneously.
It also enables real-time "delivery vs payment" settlement of trades and real-time fund transfers.
The technology went into production in March 2019 with funds from Equity Trustees, Host Capital and Tutman distributed via the Aviva UK IFA and D2C platforms, and is now being extended across a "wide range" of asset managers and UK platforms.
Goffin added: "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.
"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 CEO and founder, commented: "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. We also plan to evolve the nature of managed funds themselves, enabling innovation in how asset managers deliver solutions for retail investors."