Northern Trust offers services to Cryptocurrency Hedge Funds
Northern Trust, the megalithic finance company based in Delaware and headquartered in Chicago, Illinois has visibly increased their involvement, across all levels, with blockchain and its derivatives.
They have already integrated several blockchain based technology in overseeing the company’s private equity transactions. As of this writing, the company has $10.7 trillion under their care. They have also silently offered the management of the funds they control to a vetted group of cryptocurrency hedge funds that have shown the preference for leading cryptocurrencies – Bitcoin and Ethereum.
Pete Cherecwich, Executive Vice President and a member of Northern Trust’s Management Group in Chicago, gave his insight on how the company decided to go through with the exciting development. He gave a little peek to the inner workings of the proposed blockchain architecture that will soon be the bloodstream of the company’s funds.
A potential market
He remarked how crypto tokens, assets derived from blockchain, can be used to represent ownership and pledges of any possible entity of value. Be it movie rights, art, gold, or actual state-regulated money. Cherecwich explained that when these digital assets go public, they will have to be managed in a seamless and efficient way.
This is not the first involvement of the massive company in the blockchain technology. Three unnamed sizable ventures were already tracked by Northern Trust. The three were flirting with shifting into cryptocurrency hedge funds in an effort to expand their investment portfolios. He was, however, unable to share the name of the ventures as their identity are protected by non-disclosure agreements.
Earlier in 2018, Northern Trust has already been seen to be building up for their involvement in the crypto industry. This was confirmed by offering to share information among other hedge funds. This helped prospective hedge funds by allowing them to verify their sets of data to ensure the proper setup of their infrastructure. To make sure that everyone is paid for justly, the company assisted by administering the assets of the clients and keeping records of their value. Originally, much of the development for the platform was going to be used to manage existing traditional assets. But after the shift in priority, the crypto asset ready platform will now be looked upon to manage all kinds of assets. Some of the services that were created especially for crypto assets are the asset pricing, anti-money laundering, validation of assets, and risk assessment and mitigation.
Plan for the Future
Despite the enthusiasm, the firm is not just about yet ready to take the driving seat in their cryptocurrency investments. This is the case even with a boatload of assets that were made available to support the venture. As of the moment, there is also no plan to change this mindset in the near future. He reiterated the importance of assisting their clients in managing their crypto investments. They treat the move as an exercise in getting their feet wet for when the day finally comes that blockchain becomes too big for even them to ignore.
Cherecwich has complete faith in the digital currency and cryptocurrency hedge funds. He envisions that one day USA will digitize its currency where blockchain transactions will become the norm. He stressed that they have to be in on every minor development until that time comes. He is not against the federal currency in general, but he does think that money will only be the ceremonial representation of one’s crypto asset. The setup foreseen by him is actually beneficial for the US. Retaining the dollar would keep the country’s ability to dictate the global economy. This is because the dollar would retain its status as the basis of value for all the other currencies. The government can also benefit from the same benefits attributed to blockchain based currencies like security, transactional speed, and traceability.
Besides the new direction in cryptocurrency, Northern trust is planning to move a sizable portion of the workflow of their $77 billion private equity business into the blockchain.
A soft launch was done on Q1 of 2017. The platform technology was originally created for Unigestion – a Swiss firm managing $24.9 billion in client assets. A lower version of Hyperledger Fabric was used in the project. Hyperledger Fabric is an open-source blockchain framework implementation that rivals both platforms that built Bitcoin and Ethereum. The integration proceeded smoothly. And after a mere number of months, they were able to improve over the initial basic installation by adding more features to their implementation.
The blockchain based platform is built to cater to more than just attending to transactions. The upgrade also furthered automation to allow easier asset ownership exchange among the partners. The system also features a capital calls that broadcast deal proposals to other users of the system and beyond. This can limit operational costs by limiting the involvement of expensive financial managers to oversee the process.
Northern Trust put together the best minds to create the services they now offer. 12 highly skilled developers with a specialization in cryptography and infrastructure were involved in the project. They were reinforced by a group of knowledge experts in the product, regulations, operations and the target market. The project was good to go after half a year since they have started.
Some hundred clients have already availed of the service despite limited information being shared by the firm. They were tapped to smoothen out some rough edges in automating functions that were supposed to be done by middlemen. Cherecwich has exclaimed that there is much profit to be had in the project.
A look back
This development is a monumental step for both the company and the industry itself. As fixtures of the industry, it was expected that traditional financial institutions would be convinced to finally join in. It is thought of that traditional companies, in general, do away with complex and convoluted ideas that are too risky. But this is not the case. The only reason these institutions are labeled traditional is that of how long they have survived which is a testament to their resilience. And this resilience is a product of many factors, but most importantly, of innovation. In the real world, it is not strong who survives, but the most adaptable. These companies were merely riding out the storm, waiting for their chance to pounce.