Banking Industries Investment

Northern Trust transfers private equity blockchain to Broadridge

northern trust

Today Northern Trust announced that it’s transferring its private equity administration blockchain to Broadridge which will continue to develop it. By Broadridge taking it over, the platform will be available to the entire industry as opposed to just Northern Trust’s clients.

“Northern Trust pioneered the development of blockchain technology that supports the complex PE lifecycle. The platform delivers real-time insight and transparency to all parties, including fund managers, investors and auditors, and enables regulatory access when required,” said Pete Cherecwich, President of Corporate & Institutional Services, Northern Trust.

“For the benefit of our clients and the industry as a whole, it’s now time to hand over the reins to a technology provider with deep FinTech expertise. Broadridge’s administrator-agnostic position, coupled with its DLT leadership and global footprint, make them an ideal firm to open up this innovative technology to the marketplace, paving the way for the digitization of the asset class.”

The platform automates the “middle office” functions. It helps with capital calls, investments, divestments and distributions. When it takes it over, Broadridge plans to add data and analytics tools. Northern Trust initially worked with IBM and hence the platform is based on Hyperledger Fabric.

“The alternatives/PE marketplace is expanding rapidly, and the technology needs of this evolving marketplace are underserved,” said Eric Bernstein, Broadridge’s head of asset management solutions. “This is another example of Broadridge’s commitment to driving the innovation roadmap for the financial services industry and has the potential to be a real game changer.”

Existing relationship

There is already a blockchain track record between the two companies. Broadridge has piloted its blockchain proxy voting system at the last two Banco Santander AGMs. Northern Trust was one of the custodians.

Northern Trust Investments is also one of Broadridge’s top ten shareholders.

It’s worth exploring the motives of both parties. Blockchain is generally a “team sport”. There’s an argument that with enterprise blockchains, companies should only need to integrate with one or two platforms rather than many.

On the one hand, Northern Trust is likely to handle all the administration for their private equity clients. So the argument doesn’t hold so well there. But for private equity investors, there’s a stronger case because they will invest in multiple private equity funds.

Because of the phrasing as a ‘transfer’ rather than a sale, some might question how successful the platform was. But Broadridge would not be taking it on if it were a dud.

Broadridge’s blockchain pedigree

The technology company has experimented with its blockchain proxy platform in Japan as well as with Santander. It’s existing proxy systems are used by more than 50 percent of public companies.

To address the EU Shareholder Rights Directive, it will use blockchain to share investor identities held by intermediaries or custodians with corporate share issuers.

Plus it is a shareholder in Digital Asset and recently shared details about its experience using DAML, the smart contracting language from Digital Asset.

More to follow.