Digital transactions conducted with blockchain technology continue to pick up momentum with leading financial institutions, even as the crypto/digital currency world reels from bankrupt broker FTX.
Proponents say blockchain and digital currencies help make illiquid assets, such as stakes in private funds more liquid, and less expensive for investors.
Hamilton Lane Inc.
and Apollo Global Management Inc.
will now allow investors to take part in investment funds by making digital payments on the blockchain, said technology executives taking part in the programs.
Hamilton Lane’s Private Assets Fund will digitize fund share ownership records on the non-profit Provenance Blockchain Foundation ledger through the Digital Fund Services (DFS) platform offered by Figure Technologies Inc. The Provenance Blockchain, which is used by more than 50 financial institutions, has supported more than $10 billion in transactions.
Apollo is also launching a new digital asset fund with the ability for investors to take part via digital currency investments on blockchain, said Provenance Blockchain Foundation CEO Morgan McKenney.
Apollo is working with Figure Technologies on using blockchain transactions for transferring mortgage loans, and securitizing assets.
Hamilton Lane will allow the USDF Consortium, a digital currency coin backed by regulated banks, in the fund. The digital currency will make it easier for fund investors to buy or sell stake in the fund. Previously, such transactions took place between multiple intermediaries and involved more fees.
“It allows counterparties who don’t know each other to transact,” McKenney said. “With digital money on a blockchain, you don’t need all of those intermediaries and you can allow businesses to accept payments in real-time.”
At last check, the Provenance Blockchain has been used by more than 50 financial institutions and has supported more than $10 billion in transactions.
McKenney said the technology can also help open up the asset class by making transactions more accessible with fewer fees.
Earlier this year, KKR & Co. Inc.
unveiled plans to tokenize growth fund stakes through a public blockchain.
While the rise of the internet in financial services in the past 20 years has made it easier for consumers to transact, the execution of those transactions still often relies on paper documents and other antiquated tools.
“The back office has worked the same way as it has for decades — it takes time to settle deals such as stock purchases because you don’t know if the buyer has the money or if the seller has the asset,” said McKenny, who formerly worked as chief operating officer of global consumer banking for Citigroup
Provenance operates as a custom-built platform for financial institutions to move lending and other business functions to the blockchain and to digitize some assets.
Hamilton Lane initially filed for new digital share classes on Oct. 26 for its Private Assets Fund. It’s the first time a firm has provided exposure to a private markets investment strategy under the 1940 Act through a blockchain-native share class, according to a statement from Figure Technologies.