If you have ever built an investment portfolio, chances are you have worked with mutual funds before. As Investopedia puts it, “one of the main advantages of mutual funds is they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities.” As such, they are a great tool for people who are just getting into investing.
For years though, mutual funds have been plagued by administrative inefficiency. The funds have to manage the myriad of investment under their control while dealing with their investors individual transactions and make it all work. Reuters recently put out an article describing the difficulties Swedish financial group SEB was having with mutual funds:
Unlike the equities markets where trades are recorded by a central securities depository, the Swedish fund market does not have a central entity responsible for recording fund holdings.This makes tracking purchases and sales of fund units a complex administrative process involving various parties. Currently it is mainly handled through a mix of different technologies and is in part still paper-based.
Now there is a new reason for firms such as these to have renewed faith. “Exchange group Nasdaq Inc and Nordic financial services group SEB have teamed up to test a blockchain-based mutual fund trading platform for the Swedish market in an effort to simplify and make the process faster.” This improved efficiency should allow easier administration and, by extension, better customer service. Time and resources that had been spent on the process can now be shifted towards making money which in turn is good for the investor. Magnus Haglind, a senior VP at Nasdaq says:
“This is a perfect use case for the blockchain,” Magnus Haglind, senior vice president and head of product management, market technology at Nasdaq said in an interview. “It is not about disrupting the industry, it is focused on bringing efficiencies.”
Mutual fund investors should be excited about the prospect of blockchain technology. It can truly change the market and help you make more money.
To read Investopedia’s guide on mutual funds, click here.
To read Reuters article about Nasdaq and SEB’s blockchain experiment, click here.
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