Say Goodbye to Traditional Fund Managers
How blockchain could replace the middlemen
Blockchain is revolutionising all kinds of industries — but few have thought about what it means for one of the most traditional forms of investment: the investment fund. It got us thinking, while our parents and grandparents might invest in a mutual fund — would we?
These kinds of funds have long been portfolio staples — and it’s easy to see why. By pooling their resources, investors are able to take advantage of a wider range of investment opportunities, better management expertise and (generally) lower fees. Compared to many other investments, funds balance a healthy ROI with manageable levels of risk.
However, as McKinsey & Co have pointed out, the industry is in a difficult spot right now. While low-cost tracker funds are on the rise, the more traditional funds seem to be struggling to find many takers. Especially younger ones.
And we can see why.
McKinsey’s own report warned of “paltry returns” and “cost pressures” as two of the biggest challenges funds are facing. With tracker funds offering lower and lower fees while traditional ones still have bloated back offices, there’s only so far asset managers can go while still remaining profitable.
And so the question is: could blockchain offer a solution for this trillion-dollar industry?
Many people in the blockchain space immediately jump to a blockchain-based solution — even if there are better, non-blockchain solutions out there. Here, though, there seems to be a genuine opportunity for innovation that few are talking about.
Right now, you can find plenty of funds that will invest in blockchain for you — but we’re yet to find one running on it.
And it got the team at MyBit thinking: why aren’t funds being managed by technology, rather than middlemen? Blockchain already has the potential to improve how we manage and invest wealth. But, more than that, it offers a trustless system (there are no centralised asset managers who you have to trust to protect your assets and send you any profits). For funds, this solves the problem of their over-bloated back offices — and for investors, it offers trust, transparency and even lower fees. It’s a win-win.
But this is broader than the idea of funds without fund managers. If we think about blockchain’s potential to distribute wealth, there are applications far beyond investment platforms alone. Think wills, trusts and payrolls. Imagine if in future we could do away with excess lawyers, brokers and third-party fees.
That future may not be so far off, after all.
Until next time!
The MyBit Team.
