How Blockchain Technology Can Transform Troubled Hedge Funds

Ten years after the 2008 financial meltdown, hedge funds still struggle for survival. They’re not alone, points out my client Jamil Hasan, in his executive summary for his paper, “We Help You Leverage Blockchain Technology to Return to Cash Cow Status.” Indeed, according to Deloitte, all asset management companies face narrower profit margins and a stagnant market.

Rapid Technological Developments a Stumbling Block for Fund Managers

Add these factors to hedge funds’ unique susceptibility to rapid changes in technology—since these funds typically invest in a broad spectrum of industries—and you have a crisis in the making, as Jamil points out. The fast rise of the Internet of Things (IoT), augmented reality (AR), virtual reality (VR), cryptocurrencies, and blockchain technology make it a huge challenge for hedge funds to create and maintain sustainable strategies.

Redemptions are growing, while the global economy changes by the second. With them, a growing list of reporting requirements consumes time that hedge fund managers would rather spend in finding promising new investments. Hedge funds must undergo a transformation to survive.

Blockchain Technology, Properly Applied, Can Revitalize Hedge Funds

Within one of those technologies, though, is the seed of renewal, not of destruction. Blockchain. On the surface, it may seem to be one of those rapidly changing factors that complicate life for hedge fund managers. In reality, it can be a hedge fund’s savior.

The reason lies in blockchain’s efficiency and security. First of all, every blockchain transaction is unchangeable by its very nature. Transactions cannot be copied, making each permanent—and secure. Furthermore, permissioned blockchain technology assures participants of each other’s verified identity outside the network, creating trust and fulfilling Know Your Customer (KYC) requirements within minutes, not days. Only a transaction’s participant can see transaction details.

The speed and security of transactions within permissioned blockchain technology make it a natural system for hedge fund managers to leverage as they seek a way to increase profit margins—by anywhere from 24 to 36 percent.

Furthermore, a thorough knowledge of open blockchain technology can help hedge fund managers select as investments only those businesses which put blockchain technology to use most efficiently. Knowing which type of technology will best benefit a particular business will give these managers the edge in selecting which ones they want to invest in.

Summing up, Jamil points out the following advantages for hedge fund managers:

  • Using blockchain technology can reduce validations by 30 to 50 days, allowing managers to close sales more quickly and better automate the process.
  • Automated, programmable smart contracts and payments will boost efficiency and discover new streams of revenue. Through a consortium with other financial institutions, such as banks, hedge funds can reduce the cost of doing business by five to ten percent through increased security and speed of each transaction.
  • Blockchain allows fund managers to validate and refine data quickly, provide verifiable customer details, match customers to trade, and conduct research quickly. This rapid-fire way to do business will attract more millennial clients—a generation which expects to conduct transactions in a heartbeat.

Jamil Hasan’s expertise in all things blockchain has brought him to the attention of financial gurus all over the world. But he didn’t get that attention in a vacuum. He found a partner in the team at Blue Sky Ideation—whose mission it is to help Big Ideas come to the world’s attention.

Your Big Idea may not involve an interview with NASDAQ, as did Jamil’s. But just like we did with Jamil, we’ll sit down with you to

  • Discover your aspirations
  • Find your pain points
  • Find a way to overcome those challenges to achieve your dream

Just like Jamil, you’ll build relationships through Blue Sky’s extensive network of strategic partnerships, each world-class link bringing you closer to realizing your goals.

It’s time for your Big Idea to conquer your world. Contact the team of business-building experts at Blue Sky Ideation for your free consultation today.