Using IOTA as a solution for the US$65.7 trillion Asset Management industry

The purpose of this post is to introduce a project under development using IOTA technology

Introduction

It is undoubtable that DLT technologies have already changed the way we look at things, the potential of this disruptive technology is overwhelming. DLT has created a whole new model that, ironically, recreates all about the ancient world. The same, but better, faster, stronger, cheaper and prettier.

People, organisations and entrepreneurs that have already realised the potential of this technology and decided to jump into this new pool have realised the huge benefits that brings to both their role improvement as a service or product provider and to society, their customers.

But remember, this has only started

Traditional blockchains also have their own problems (huge fees, scalability, miners dependance, vulnerable to quantum computers…), and here is where IOTA stands from the rest solving all this issues, enabling much more efficient organisations.

Problems in the Asset Management industry

The US$65.7 trillion asset management industry (source)has always been extremely restrictive, with enormous economic and legal entry barriers allowing only those individuals and organisations with vast amounts of capital to enter and operate. This prevents individuals who may have the knowledge, but lack the monetary resources, to be able to make a living out of the management of people’s savings.

The first problem in this industry is the entry barriers, which are enormous (for example, at least US$100,000,000 is needed to start running a hedge fund (source) on top of the sector requirements which include previous experience, etc.)

The second problem stems from the fact that investment funds accrue significant costs due to their organisational structure, typically composed of: Fund Administrator, Operations Team, Trading Desk, Auditor, Risk Management and the Custodian. This not only affect costs, it also leads to inefficiencies and opens up the fund activity to human error and misconduct by management or other departments, which could lead to horrific scenarios. One such example (source) is when a notable Hedge Fund manager lost all his investors’ money due to incorrect risk management without informing his clients.

Another problem in this industry is that it is quite complicated to actually choose a fund to invest in since an Investment Funds Marketplace does not exist. This leads to a critical waste of time- searching and eventually choosing amongst the number of companies dedicated to investments in the market, and the amount of funds each company has. This can result in the need to hire a financial advisor to complete this work along with the costs which go with it and not always resulting in success.

The market so long

The asset management industry is financially staggering. The total volume of assets under management (AuM) in 2018 was US$65.7 trillion (source), without taking into account crypto assets, which, in 2017 surpassed a market volume of US$50 billion (source). PwC states that the traditional market itself will grow to US$145.4 trillion by 2025 (source), making asset management one of the largest markets in the world.

The crypto market alone is predicted to increase to US$40 trillion in a relatively short period of time. This is according to experts such as the Founder of Pantera Capital, Dan Morehead, and the CEO of the crypto exchange Kraken, who based his opinion on the increasing number of young people graduating from cryptocurrency/blockchain related programmes along with the growth in education and normalisation of this new industry amongst younger generations.

The solution?

IBERIAN

IBERIAN is a start-up that plans to create an open-source decentralised software platform for the asset management industry that will open the door to the sector while simultaneously creating an efficient, transparent and reliable solution for organisations dedicated to this industry (Hedge Funds, Mutual Funds, Investment Banks, Pension Funds, etc.). This IOTA based software platform will solve the major problems previously exposed for all parties involved in this activity: organisations, individuals and investors.

• First of all, In relation to entry barriers, there is a solution to bypass this: operate exclusively with digital assets. We, thanks to DLT and specifically IOTA, can change that, enabling the management of digital assets in an open-source decentralised software. This will benefit the entire community by enabling the creation of investment funds with as little as $100, allowing any individual to manage crypto portfolios and attract potential investors.
• Secondly, regarding the issues with inefficiencies, human error and misconduct, along with the costs associated in running a fund, Qubic smart contracts and oracle machines have the solution; replacing all the personnel traditionally needed for running a fund: thus, dramatically reducing costs. This will not only affect costs: with a Tangle and Qubic smart contracts based fund, investors will be assured that the fund activity will not operate outside the limits established upon them, which will have been previously chosen by the fund manager, publicly shown and signed by both parties (manager-investor).
• Thirdly, in terms of the current difficulty in choosing a fund and, therefore, attracting clients by firms, IBERIAN will store the track record of data, such as performance, along with other factors, of every fund and manager/entity on the Tangle. This will be used to create the first ever Fund Marketplace, creating greater ease while incurring zero costs for investors. They will be able to choose a fund by filtering different types of options available (e.g. 3-year average return, total fund capitalisation, amount of investors per fund and virtually any other parameter) which, in turn, will lead to entities and independent managers attracting more clients as they now will have been encountered on the platform by potential investors.

Conclusion

Even with the current problems, inefficiencies and entry barriers that leaves a lot of people aside and makes it almost impossible to set up a fund, the asset management industry is financially huge and it is predicted to be even bigger.

DLT and specially IOTA, due to its feeless and scalable nature has the ability to change that, we are building an open source software platform for an easy and complete crypto & traditional asset management platform that will serve as well as one of the firsts ever Fund Marketplace for investors.

This is a huge opportunity for giving life to the first of its kind IOTA based project that will make an enormous impact on the Finance industry and will revolutionise the asset management sector, making it more inclusive, transparent and efficient while reducing costs.

Update

Second introductory article is out!: https://medium.com/iberian-software/iberian-iota-regulated-and-operated-funds-dcfe794b9f04

If you’re interested in this project and/or would like to get involved in some way, contact me via Discord: JuananPGM#0295