Northern Trust and IBM Pioneer Use of Blockchain for Private Equity Record-Keeping

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by Polina Chernykh · 3 min read
Northern Trust Corporation is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Photo: Julie Kertesz/Flickr
Northern Trust Corporation is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Photo: Julie Kertesz/Flickr

The Chicago-based financial services provider is launching the first commercial application of the blockchain technology to administer private equity funds.

Northern Trust Corporation, in partnership with IBM and other shareholders, has developed a new blockchain solution for the private equity market.

The new system records documents and information on transactions involving the private equity funds and lets regulators to access that data when necessary.

Based on the Hyperledger Fabric, the program will deliver greater security, efficiency and transparency to the process which is mostly manual today. Initially, the technology will be available to clients on a selective basis.

“Current legal and administrative processes that support private equity are time consuming and expensive,” said Peter Cherecwich, president of Corporate & Institutional Services at Northern Trust Corporation.

“A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes. Northern Trust’s solution is designed to deliver a significantly enhanced and efficient approach to private equity administration.”

Currently, the system is being used to manage the administration of a private equity fund operated by a Switzerland-based asset manager Unigestion.

In addition to Hyperledger Fabric, the solution utilizes IBM’s Blockchain’s high security business network. “Blockchain is an ideal technology to bring innovation to the private equity market, allowing Northern Trust to improve traditional business processes at each stage to deliver greater transparency and efficiency,” said Arvind Krishna, Senior Vice President of Hybrid Cloud and Director of IBM Research.

“Based on the Hyperledger Fabric and secured by IBM Blockchain’s high security business network, IBM collaborated with Northern Trust to build a powerful new enterprise solution using blockchain for the private equity industry.”

In the last few years, the distributed ledger has attracted a growing interest from financial institutions. Companies continue to invest in the development of blockchain solutions that can make their operations more efficient and less expensive.

According to a recent research by IBM, 90% of government organizations plan to invest in blockchain to use it in financial transaction management, asset management, contract management and regulatory compliance by 2018.

Over the past year, we’ve seen a number of new blockchain projects developed for use in different sectors, including health data management and logistics. Last month, IBM formed a new blockchain consortium that is set to transform the global cotton industry.

According to vice president of blockchain innovation at Nasdaq, Fredrik Voss, the technology now looks even more promising than the company thought three years ago, Forbes wrote. The company now uses the blockchain for recording transfers of shares via its Nasdaq Linq platform.

Meantime, the head of Sberbank, which is a major Russian bank, also believes in the potential of the distributed ledger technology. As he recently stated, the commercial application of the blockchain in Russia is possible by the end of 2019.

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Polina Chernykh
Author: Polina Chernykh

Polina is an undergraduate student at Belarusian State Economic University (BSEU) where she is studying at the faculty of International Business Communication for a degree specializing in Intercultural Communication. In her spare time she enjoys drawing, music and travelling.

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