Financial institution BNP Paribas SS collaborates with Azimut and Allfunds for fund tokenization, aiming to bring blockchain technology to the asset management sector.

In a groundbreaking collaboration, Azimut Group, Allfunds Blockchain, and BNP Paribas Securities Services are leveraging blockchain technology to transform the fund management industry.

Azimut Group, an Italian asset management company, is actively participating on Luxembourg's FundsDLT, a blockchain-based funds distribution platform. The company has also invested in the blockchain and digital assets sector, demonstrating its commitment to embracing innovative technologies.

One of the potential benefits of blockchain for the fund industry is improved efficiency and transparency. Azimut Group's subsidiary has tokenized units in an asset-backed securities fund, AZ RAIF 1, which could offer greater liquidity for asset management.

The use of blockchain to tokenize assets can potentially offer mass customization potential for fund management. For instance, AZ RAIF 1 is an alternative investment fund with assets underpinning the fund being non-performing loans and debts of insolvent companies. While the potential benefits of blockchain for asset-backed securities involving regular payments might be more useful, the collaboration has demonstrated the potential for innovation in this area.

The Allfunds Blockchain was used in the first stage of the project to assess efficiencies in transferring fund units. BNP Paribas Securities Services, the service provider, has also been involved in a bond token for EDF.

The benefits of tokenizing funds are manifold. Democratizing Access is one such benefit. Tokenization enables fractional ownership, breaking down high-value funds into smaller, affordable tokens. This broadens investment opportunities to retail investors and those in emerging markets who traditionally faced high barriers to entry.

Efficiency and Cost Reduction are also significant advantages. By automating processes such as compliance, settlement, and dividend distribution through programmable smart contracts on blockchain, tokenization reduces reliance on intermediaries, cuts operational costs, and mitigates human error.

Enhanced Liquidity is another key benefit. Tokenized funds can be traded 24/7 on digital platforms, allowing investors to buy and sell fractions without waiting for lengthy paperwork or traditional settlement cycles. This is particularly valuable for typically illiquid asset classes.

Faster Settlements are also possible with blockchain. Blockchain’s shared ledger and embedded smart contracts ensure a single source of truth for transactions, which minimizes trade breaks and accelerates settlement compared to conventional systems.

Transparency and Auditability are also improved with blockchain. Every transaction is immutably recorded on blockchain, providing a real-time, tamper-proof audit trail that enhances trust and regulatory compliance.

Programmability and Flexibility are additional benefits. The embedded rules within tokens enable innovative financial use cases, such as using tokenized shares as collateral or automating complex corporate actions.

These benefits collectively demonstrate how the collaboration leverages tokenization to transform fund management by lowering entry barriers, increasing operational agility, and creating a more transparent, efficient, and liquid investment environment.

Intain's administration solution can be used to share real-time performance data on the underlying assets backing the funds. Paul Daly, Head of Distribution Products and Solutions at BNP Paribas Securities Services, considers blockchain technology to have the potential to improve efficiency and transparency in the fund industry. Giorgio Medda, Azimut Group CEO, stated that the tokenization aims to enhance the liquidity profile of investments in private markets and plans to launch a fund with native tokenized units.

The collaboration between Azimut Group, Allfunds Blockchain, and BNP Paribas Securities Services is a significant step forward in the adoption of blockchain technology in the fund management industry. By harnessing the power of blockchain, these companies are working to create a more accessible, efficient, and transparent investment environment for all.

[1] - Blockchain for Funds: A New Era of Investment Management [2] - The Benefits and Challenges of Blockchain in Asset Management [3] - Tokenizing Funds: A Game Changer for the Asset Management Industry [4] - The Role of Blockchain in Improving Liquidity in Asset Management

Financial institution BNP Paribas SS collaborates with Azimut and Allfunds for fund tokenization, aiming to bring blockchain technology to the asset management sector.