Northern Trust, one of the largest global financial asset management companies, intends to start a fund administration service for crypto hedge funds. This means including blockchain and cryptocurrencies in the many divisions of the company.
Northern Trust President of Corporate and Institutional services Pete Cherecwich explained that the over century-old institution committed a vast amount of resources into the technology. He also revealed how much the company was involved in blockchain technology overall in an interview with Forbes.
“You can take anything today. You can take movie rights, you can take all sorts of entities, and you can create a token for those. We have to be able to figure out how to hold those tokens, value those tokens, do those things.”
Cherecwich also explained that Northern Trust aims to offer a new product much like the usual custodial services, but with lower transaction fees:
"The fees right now the custodians are charging are pretty high, not the same fees that we get — ultimately, I believe unsustainable, because it needs to be an efficient model."
Moreover, the company was reportedly able to create three new “mainstream hedge funds”. These hedge funds are actively diversifying their portfolios with the use of cryptocurrency. No company names were stated, however, due to non-disclosure agreements.
According to Cherecwich, Northern Trust is providing accounting services to funds that have engaged in crypto-futures. Although the company has managed over $370 billion worth of assets to date, the financial institution mentioned that custody products for cryptocurrencies will not be launched for at least another year.
A promising future for blockchain technology
What remains certain is the industry the financial giant is going into. Because of the low transaction fees and transparency offered by custody products, the $2.5 trillion private equity industry continues to be the target. In the past, high volumes of transactions were very difficult to work with. Cherecwich sincerely believes the blockchain-based solutions will win the market consisting of auditors and regulators.
With this, the company launched a product utilizing blockchain technology – one that allows audit firms to instantly access a secure “golden copy” of private equity lifecycle events. Behind the product is a Big Four accounting firm PwC who will be Northern Trust’s partner. The adoption of this product into the industry will then allow for more transparent audit firms in general.
As much as Northern Trust is on the right track, it is also true that it is not the first to offer this kind of service. Earlier in July, Coinbase announced the launch of its crypto-asset custodian solution for institutional investors. The offering is also quite solid due to the newly acquired status of independent broker-dealer which means it is SEC-compliant and ready to penetrate new markets.