Blockchain most popular with EU PE managers

European private fund managers are more likely to incorporate blockchain technology into their funds than their US peers as costs of adopting the technology are lower, according to a University of Oxford report.

The European market also benefits from a larger number of venture capital funds developing ways to use the technology, which large managers then scale up to suit their needs, the report said.

The study looked at data from 105 private funds across private equity, hedge funds and venture capital. The US has 43 private funds using blockchain technology in some capacity, compared with the EU, which has 70.

Geneva-based investment manager Unigestion, along with fund administrator Northern Trust and IT behemoth IBM, became the first firm to process its fund administration on the blockchain in February. The technology is a distributed ledger that records all of the fund’s transactions and related documents across a number of computers, enabling investors, fund managers and administrators to access the information via secured means.

But US managers’ systems “create barriers to entry for larger advisors to invest in, and utilize blockchain technology,” the report, published on the Oxford Business Law Blog, said.

They face an imbalance between blockchain investment costs and benefits of using the technology, not experienced by smaller funds currently experimenting with the technology. This is the biggest disincentive for large managers to make the investment in the US, it added.

Outside of venture capital, there are few US examples of blockchain usage in private equity. Intellisys Capital manages the Main Street Investment LP fund, set up in February. Mainstreet Investment aims to raise $25 million by September, by distributing a blockchain-based token, which can be bought using any one of 29 digital currencies, including bitcoin. The capital will then be invested in a traditional private equity model.