Research from Calastone forecasts more than £1.9bn worth of potential cost savings for the global mutual funds market as a result of moving to a blockchain-enabled distributed market infrastructure.
The forecast savings demonstrate the scale of financial impact that greater automation and interconnectivity could bring to the funds market. Calastone’s predictions further substantiate another study released by Forrester, one of the world’s leading research and advisory firms, which has analysed the financial impact Calastone’s current transaction network has already had on the global funds market. Forrester’s research reveals that transaction automation through Calastone has delivered £458 million in savings over the previous six years.
Forrester research shows significant cost savings today at a global, market level
Forrester conducted a global market survey of 234 mutual funds organisations to determine the tangible value and financial impact Calastone’s transaction network has had on the global funds market in moving the manual process of funds trading to an automated network infrastructure. The results of the research have shown that, in addressing the friction and operational inefficiencies throughout the transaction cycle across all trading counterparties, Calastone has generated significant net benefits for the market, producing more than £458 million of cost savings over the previous six years. The research covers Calastone’s key global markets including the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia.
The results showed five key advantages for fund firms in connecting to Calastone’s automated transaction network; improved process times, reduction in manual errors (and the time required to address them), ability to scale and process greater volumes of trades via increased flexibility in trading windows, faster response times and greater transparency via better audit traceability.
Calastone forecasts even greater savings for the future – the vast potential of blockchain…
Where Forrester’s study highlights the value that automation through Calastone’s global fund transaction network has already brought to the trading of mutual funds to date, Calastone’s subsequent analysis assesses the far greater scale of savings its blockchain-enabled distributed market infrastructure (DMI) could deliver for the global market, estimating significant further cost efficiencies totalling over *£1.9bn worldwide.
The numbers released by Calastone represent the tangible, financial value that a blockchain enabled distributed market infrastructure can deliver, through stripping-out many of the remaining inefficiencies currently embedded in the system, resulting in increasing cost, risk, operational and regulatory pressures. Where Calastone’s network automation has been successful already, a distributed market infrastructure offers a scalable solution to meet the needs of fund industry participants and investors now and for the future.
In June, Calastone successfully completed the first phase of its Blockchain-enabled distributed market infrastructure (DMI) proof-of-concept and in December the company announced its core network technology will migrate onto blockchain technology in 2019.
Commenting on the results of the study, Julien Hammerson, CEO Calastone, adds;
“Our mission has been to address the frictional cost of trading mutual funds and Forrester’s research demonstrates the considerable value Calastone has delivered for the market already – more than £458 million over the previous six years. These results are testament to the impact technology can have on an industry at a global level. Though that is just the first step…
Whilst what we have achieved to date has enabled sizeable savings for the sector, our own analysis highlights how significantly these benefits can be accelerated when using blockchain technology to automate the entire lifecycle of mutual fund transactions, from order placement through to the settlement and payment, through our new distributed market infrastructure – from millions to almost £2bn each year in cost savings”
*Calastone Methodology
Calastone has calculated the potential cost savings of moving to a distributed and mutualised market infrastructure using data from Deloitte’s recent 2016 study, “Europe’s fund expenses at a crossroads; The benefits of mutualizing the cost of distribution.” Calastone’s calculation determines the potential basis point (bps) savings across key global markets. Calastone’s bps calculation has been applied to mutual fund assets under management, at an individual market level, in the following markets; UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan & Australia.
