iCapital, an alternative investment platform, has announced the utilization of blockchain technology for the management of a private fund distributed by UBS Wealth Management and administered by Gen II. The firm’s distributed ledger technology (DLT) will oversee all aspects of the fund’s lifecycle, encompassing subscriptions, reporting, and liquidity events.
According to Jason Broder, managing director and chief product officer at iCapital, the integration of blockchain technology has been a culmination of two years of effort. He emphasized that the DLT framework is now equipped to accommodate any fund. Broder further added that discussions with industry stakeholders have evoked enthusiasm, foreseeing a significant reduction in operational challenges associated with accessing private investments.
Broder asserted that the adoption of a distributed ledger marks a pivotal advancement in the alternative investments ecosystem. It has the potential to establish a standardized data infrastructure, addressing prevalent operational inefficiencies across the industry.
Executives at iCapital anticipate that the DLT implementation will streamline processes for financial advisors and fund managers by facilitating seamless data sharing and transaction processing. The firm estimates that over the lifecycle of a private capital fund, the technology could eliminate the need for more than 100,000 activity reconciliations, thereby minimizing errors and manual interventions.
The decision to collaborate with UBS Wealth Management for the blockchain launch stems from their longstanding partnership, as noted by Broder. He highlighted UBS’s proactive approach towards embracing technological innovations in the alternative investments domain, making them an ideal partner for this initiative.
While UBS executives refrained from commenting, Jerry Pascucci, co-head of global alternative investment solutions at UBS, acknowledged the significance of the blockchain integration. Pascucci emphasized its role in enhancing efficiency and data quality within fund management, aligning with the firm’s commitment to simplifying the management of alternative investment portfolios for financial advisors.
The extent of blockchain adoption among iCapital’s competitors remains uncertain. Opto Investments expressed skepticism regarding the technology’s efficacy in private markets, citing a lack of efficiency and cost benefits, along with concerns about its impact on tax treatment benefits.
CAIS, another player in the alternative investment space, announced its intent to explore blockchain applications in late 2021. However, there is ambiguity regarding its implementation within the funds on its platform, as the firm did not respond to inquiries.
In conclusion, iCapital’s integration of blockchain technology signifies a significant leap towards enhancing operational efficiency and data quality in the management of private funds. The partnership with UBS underscores the industry’s momentum towards adopting innovative solutions for addressing longstanding operational challenges in alternative investments.