Blockchain promises benefits for asset managers

Citing advantages such as reduced data manipulation and lower frictional costs of investment, a JP Morgan report recommends early adoption of the technology

While distributed ledger technology–more popularly known as Blockchain–is still considered by some as bleeding edge technology, a report from JP Morgan suggests that disregarding it is a risk.

The report, which the company produced in cooperation with management consultant Oliver Wymann, points out that Blockchain technology can be beneficial for professionals in different finance- and tech-oriented fields. This includes asset managers, to which a section of the report is devoted.

“Blockchain can help asset managers tackle many of the challenges they face today: managing data; providing solutions, not just products; and providing continuing service value to clients in a changing competitive landscape,” the report reads.

It goes on to point out potential cost benefits through “reduction in data manipulation, the decommissioning of legacy infrastructure and lower frictional costs of investment”. On the revenue side, it foresees revenue opportunities opening up from improved data sources, greater liquidity, and lower frictional costs. Investors may also benefit, as asset managers have the opportunity to compete by improving service propositions and passing on savings to prospective and current clients.

Specific drivers of cost savings cited in the report include “disintermediation of brokers and platforms”, “lower intraday liquidity requirement from faster clearing and settlement systems”,  and “pricing benefits of deeper liquidity” for portfolio management; and “more efficient data management” and “reduced reconciliation” on the finance side.

The study reports four waves of anticipated blockchain deployments. The second wave, which is expected to occur from 2017-2025, consists of data solutions. Current examples in development are applications in transaction management and regulatory reporting.

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