Clearstream’s CEO Philippe Seyll has highlighted the transformative impact of digital platforms, blockchain, and generative AI on fund distribution, emphasizing their role in enhancing compliance and streamlining processes. In an interview with Delano, Seyll detailed how these technologies are reshaping the industry, particularly in Luxembourg.
Technology and Fund Distribution in Luxembourg
Philippe Seyll: Technology and data are pivotal in breaking down investment barriers. The Luxembourg fund industry has evolved by adopting various business models to enhance operational efficiencies and create synergies. Fund platforms, standardized fund flows, and the growing significance of data have been crucial. Clearstream has emerged as a central infrastructure for fund distribution, leveraging technology to support this transformation.
Blockchain and AI in Fund Distribution
Blockchain and generative AI (GenAI) are poised to revolutionize fund distribution. Blockchain can disintermediate processes, providing direct access to end investors, real-time trading, settlement processes, and enhanced transparency. Smart contracts and automation, powered by GenAI, streamline fund processes. The continued digitalization and provision of insightful data narrow the gap between asset managers and investors, delivering better value for money and improved compliance. Clearstream, with its robust digital infrastructure, supports this digital transformation.
Challenges in Adopting Technology
Transitioning to a shared ledger model, blockchain improves investor access, product facilitation, and data handling. This model, which allows each participant to contribute to a single transaction, reduces redundant processing. However, adopting this model involves issuing native crypto share classes or tokenizing existing fund shares, with the challenge lying in shifting to an ‘on-chain’ distribution network. Clearstream supports this innovation by integrating advanced technologies and supporting both on-chain and off-chain networks. A next-gen distribution platform can provide real-time insights and foster collaboration among intermediaries.
Role of Digital Platforms
Clearstream has developed a dedicated fund distribution interface offering fund research services in collaboration with market data providers like Morningstar and Kneip. Collaborations with fintech platforms enhance portfolio management, ESG considerations, distribution checks, and due diligence services. FundsDLT, an integral part of Clearstream, facilitates market adoption among asset managers, distributors, and institutional clients.
Blockchain and DLT Revolution
Blockchain and distributed ledger technology (DLT) bring improved profitability and quality through automation, control, flexibility, traceability, security, speed, and efficiency. DLT also increases transparency among parties, providing a single source of truth where all stakeholders have access to the same information. The integration of FundsDLT into Clearstream reduces the distance between trading and post-trading, dealing with a high number of investors in a frictionless and automated way.
AI and Data Analytics
Asset managers are increasingly using AI to boost productivity, especially in investment research and client reporting. GenAI helps asset managers design go-to-market strategies, enhance reporting, and improve customer service. AI and machine learning (ML) are also used in KYC (Know Your Customer) processes, crucial for processing large volumes of transactions.
Compliance and ESG Investing
Clearstream integrates technology to ensure compliance and streamline regulatory processes. Strong control functions supported by digital tools help meet evolving regulatory requirements. Clearstream also offers ESG products and services, providing key sustainability information and connecting asset managers with relevant data points, including ESG ratings, climate insights, and sustainability goals.
Future of Fund Distribution
The fund industry is transforming, driven by technology and a commitment to improving efficiency and accessibility. Blockchain and emerging technologies are at the forefront, reshaping fund management and distribution. Clearstream is dedicated to integrating advanced technologies to drive innovation, with asset managers increasingly seeking direct-to-consumer access through their distribution channels or DLT channels. As the industry faces consolidation pressure and lower margins, technology adoption will accelerate, enhancing efficiency in asset management.
Source: delano.lu
