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“When we talk to private equity clients about blockchain,
they ask us whether it is safe, legal, and will it work.”
STUART LAWSON, PRODUCT MANAGER AT NORTHERN TRUST
ogy will help us keep track of cash-flows
in private equity, which is important
given the growing complexity of the
industry, in areas such as distribution wa-
terfalls. As waterfalls become increasingly
complicated, this technology will help us
monitor cash-flows in a more auditable
and streamlined way,” adds Estrada.
The long-term issue, however, is wheth-
er private equity is going to latch onto the
blockchain concept, or if it feels the risks
of adopting a nascent technology are too
great. Industry experts acknowledge that
blockchain or distributed ledger tech-
nology will only succeed provided the
industry coordinates and works together.
Getting to critical mass whereby multiple
players in the industry use the technology
is fundamental, but this will be a chal-
lenge.
“Major stakeholders in private equity
need to buy into the blockchain concept.
We feel blockchain will have a large role
in regulatory reporting, but there are hur-
dles to overcome, namely around sharing
data. It is here where the industry needs
to come up with answers to some of these
problems,” says Tom Walsh, product man-
ager at Deutsche Bank in Dublin.
It has taken a huge effort on the part of
private equity administrators to convince
even the most disagreeable of managers
that outsourcing operations is doable,
and that providers have the systems to
handle their bespoke portfolios. It might
be a stretch – at least in the near term – to
convert private equity on the virtues of
blockchain. But blockchain proponents
remain optimistic.
You have to be willing to succeed
“When we talk to private equity clients
about blockchain, they ask us whether
it is safe, legal, and will it work. We tell
clients our blockchain is private and not
public and that it is protected through
sophisticated encryption. Whenever we
make enhancements to the blockchain,
we consult with regulators and lawyers
extensively. And finally, our blockchain
programme and processes are continu-
ously validated by the relevant customers,
as well as accountants and auditors,” adds
Northern Trust’s Lawson.
The most likely private equity candi-
dates for blockchain
are the larger managers
“Major stakeholders
who have the technology
in private equity
resources to trial and
test use cases without
need to buy into the
it having a material or
blockchain concept.”
negative impact on op-
erations. Smaller private
TOM WALSH, PRODUCT
equity firms will likely
MANAGER, DEUTSCHE BANK
monitor this progress but
are probably not going
to make any immediate commitments to
on-boarding the technology.
“While there are still some unknowns
about the technology, there is likely to be
a transition phase through the use of ex-
isting technologies and blockchain lasting
approximately five to 10 years. After that
time, we could potentially see full block-
chain adoption, but there needs to be
industry willingness to make it happen,”
says Walsh.
The Private Equity Issue 2017
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