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iCapital Starts Using Blockchain for a Private Fund
Alternative investment platform iCapital has started using blockchain for the first time for a private fund distributed by UBS Wealth Management and administered by Gen II. The company’s distributed ledger technology will process all activities associated with 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 company’s managing director and chief product officer. The company is currently exploring integrating the technology with other participants on its platform, with further launches likely to be announced in the second half of the year.
“Certainly, in conversations we’ve had with a lot of people in the industry, people are excited about it because it’s going to eliminate a huge amount of pain points and it’s just going to solve a lot of operational problems [in accessing private investments]” said Broder. “A distributed ledger is a fantastic solution that can be a single source of truth in the alternative ecosystem. It could start to drive data standardization across the industry and really solve a lot of operational inefficiencies.”
According to iCapital executives, DLT is expected to 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 asset reconciliations over the average life of a private capital fund.
The firm partnered with UBS Wealth Management on the blockchain launch because the wirehouse is a long-term partner whose alternative investment platform is run on iCapital’s infrastructure, Broder said.
“There are many firsts that we have done together, many from a technological point of view,” he said. “They have invested a lot and are 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 the firm’s global alternative investment solutions, called the launch “an important step forward in creating greater efficiency and improving the quality of fund data.”
“We are constantly trying to make it easier for our financial advisors to manage and monitor their clients’ alternative investments,” he said.
It is unclear how many of iCapital’s competitors are currently using blockchain in fund administration. For example, executives at Opto Investments said the technology “has not shown any efficiencies or cost gains.” [private] private markets, and loses key benefits of the tax treatment of private markets.”
CAIS has announced that it will explore uses of blockchain in late 2021, but it is unclear whether it has used it with funds on its platform. The company did not respond to a request for comment before publication.