Wall Street Firms Are Banding Together to Build Alts Data Blockchain – Business Insider

A leading-edge research firm focused on digital transformation.
Subscriber since
Some of Wall Street’s most prominent money managers are banding together to create a blockchain-type system to cut down on the cost and time it takes to invest in assets like private equity and real estate, Insider has learned. 
iCapital, the New York-based financial-technology company, convened the coalition with an aim to launch the initial phase of the technology this year. So far Morgan Stanley, KKR, BlackRock, Carlyle, Apollo, UBS, Blackstone, BNY Mellon, State Street, and WestCap are participating, showing the industry’s interest in simplifying the investment process amid increased investor interest.
As opposed to securities that trade on public exchanges, where data on performance, shareholders, valuation, and the cost of investing is far more readily available, accessing data about alternative investments such as private credit can be costly and time-consuming — even for savvy, deep-pocketed investors.
The group’s aim is to develop a single distributed ledger that will join the disparate corners of the alternative investment ecosystem and increase transparency. The participants hope it will be easier to get their products in front of more investors, and will save the time and money it would typically cost them to source data on their own. The project will be led by Chris Piazza, iCapital’s chief technology officer.
Tom Fortin, iCapital’s chief information officer, estimates operations teams in this space spend about half their time reconciling data sets. If this system can reduce that time by half, that would amount to meaningful savings for investors, he said.
The venture has the ability to “create an industry standard” of sourcing alternative investment data, Fortin told Insider in an interview.
“What we believe the distributed-ledger technology allows for in the industry is to stop those reconciliations, because everyone is sharing one source of truth about that data,” Fortin, previously an executive at BlackRock from 2001 to 2017, said. “Who’s in the fund? Who are they? What are the valuations? What are the transactions?” 
The consortium’s formation reflects the growth of the private markets. And it underscores the influence that iCapital, which has received significant institutional backing since it was founded less than a decade ago, wields in the investment community.  
The company, run by Chief Executive Lawrence Calcano, a former Goldman Sachs partner, operates a platform that investors and firms use to access, analyze, and distribute alternative investments such as private equity and hedge funds.
It services $112 billion of assets as of January, and some 300 of its 750 employees are technologists. It closed on its latest funding in December, a round of $50 million that the company said valued it at more than $6 billion.
The initiative comes as regulators are calling on the opaque private equity and hedge fund industries to make greater disclosures about their activities — from fees and performance to managers’ pay — to the public.
Earlier this month, the Securities and Exchange Commission under Chair Gary Gensler proposed new rules that would force these firms to operate more transparently, a move regulators had signaled for months. 
“I think it’s time we take stock of the rapid growth and changes in this field, as well as that decade of learning, and bring more sunshine and competition to the private funds space,” Gensler said in November, referring to the years following the financial crisis. 
Private markets have ballooned in recent years, with many companies choosing to stay private for longer periods of time. A string of startups looking to capitalize on growing investor interest in exposure to these assets have cropped up in recent years, and wealth managers and money managers across Wall Street have doubled down on offering alternative products to clients.
KKR is an investor in Insider Inc. parent company Axel Springer. 
Keep reading
For you