Alternative investment platform iCapital has started using blockchain for the first time for a private fund distributed by UBS Wealth Management and managed by Gen II. The firm's distributed ledger technology will process all activities related to the fund's lifecycle, including subscriptions, reporting and liquidity events.
iCapital has been working on integrating blockchain technology for two years, and its DLT can now support any fund, according to Jason Broder, the firm's managing director and chief product officer. The firm is currently exploring technology integration with other participants on its platform, with further launches likely to be announced in the second half of the year.
“Certainly, in the conversations we've had with a lot of people in the industry, people are excited about it because it's going to eliminate a lot of pain points and just solve a lot of operational issues (in accessing private investment),” Broder said. . “A distributed ledger is a fantastic solution that can be a single source of truth in the alts ecosystem. It can start to drive data standardization across the industry and really solve a lot of the operational inefficiencies.”
According to iCapital executives, DLT should minimize the need for manual data reconciliation and reduce errors by enabling seamless data sharing and transaction processing for financial advisors and fund managers. iCapital claims this technology will help eliminate over 100,000 activity reconciliations in the average lifetime of a private equity fund.
The firm partnered with UBS Wealth Management for its blockchain launch because the wirehouse has been a long-term partner whose alternative investment platform runs on iCapital's infrastructure, Broder said.
“There's a lot of firsts that we've done together, a lot from a technology standpoint,” he said. “They've been very invested and very forward thinking in this space for a long time.”
UBS executives did not respond to requests for comment before publication. In an official statement, Jerry Pascucci, co-head of global alternative investment solutions with the firm, called the launch “an important step forward in creating greater efficiency and improving the quality of fund data.”
“We are constantly striving to make it easier for our financial advisors to manage and monitor their clients' alternative investment holdings,” he said.
It is unclear how many of iCapital's competitors currently use blockchain in fund management. For example, Opto Investments executives said the technology “has not demonstrated efficiency or cost-effectiveness in the (private) markets and misses the key benefits of the tax treatment of the private markets.”
CAIS announced it would explore uses for blockchain in late 2021, but it is unclear whether it has used it with funds on its platform. The firm did not respond to a request for comment before publication.