Northern Trust is using its Guernsey operation to launch the first ever commercial deployment of blockchain technology for the private equity market.
The company has built a security-rich blockchain, or distributed ledger solution, alongside IBM and worked in collaboration with the States of Guernsey and Guernsey Financial Services Commission to ensure the network was designed to comply with local regulations.
Northern Trust and IMB built a blockchain network to address the needs of investors seeking greater transparency, security and efficiency in the private equity market. It will be used to manage the administration of a private equity fund, domiciled in Guernsey, managed by Unigestion, a Switzerland-based asset manager with $20 billion in assets under management.
Deputy Gavin St Pier, Guernsey's Chief Minister, said:
'Guernsey has been at the forefront of innovation in the financial industry for many years. As a jurisdiction we continually monitor new technologies, support businesses in developing ground-breaking new ideas and provide a supportive environment where products can not only flourish but be first-to-market. The fact that this pioneering solution to the private equity market has been domiciled in Guernsey, and that Northern Trust has partnered with IBM to provide a secure cloud solution with a high level of cryptography to protect investor data, shows the commitment of Government to being at the cutting edge of financial services technology.'
A blockchain network provides real-time insight and transparency to all parties, including the fund managers and investors as well as allowing regulatory access when required. The blockchain solution allows the fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform offering "one version of the truth" to participants who gain access via secure means. Initially, Northern Trust intends to make the solution available to clients on a selective basis.
Peter Cherecwich, president of Corporate & Institutional Services at Northern Trust, which has offered a wide range of financial services in Guernsey since 1972, said:
'Current legal and administrative processes that support private equity are time consuming and expensive. A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes. Northern Trust's solution will deliver a significantly enhanced and efficient approach to private equity administration.'
Emma Bailey, Director of the Investment Supervision and Policy Division of the Guernsey Financial Services Commission, added:
'Northern Trust has engaged with us as regulators from the start and we are pleased with the level of openness and interaction. This is another example of the Commission's approach to innovation in the Bailiwick's financial services industry.'
Deputy Peter Ferbrache, President of the Committee for Economic Development, said the blockchain launch represented an exciting opportunity for Guernsey.
'Blockchain technology will be increasingly used and further developed by financial services providers across the globe in the coming years, so for Guernsey to be home to the first commercial venture of its kind in the world is not only very exciting, but is also a testament to the sort of high value innovation government wants to encourage, to help drive economic growth and economic diversification.'
Justin Chapman, global head of market advocacy and research at Northern Trust, said:
'Northern Trust anticipates substantial opportunities to bring improvements to the private equity market by using blockchain technology. This is an important first step to connecting participants much more effectively, including investors, managers, administrators, regulators, advisors and auditors.'