The Digital Fund: Four Trends Metamorphosing Fund Norms

In the last decade we have seen companies like Uber, Airbnb, iTunes, and Facebook reach the top of their respective fields extraordinarily quickly after first hitting the scene. This demonstrates that, in this day and age, you can be the leader of your industry without having a long history or, even more surprisingly, owning any tangible assets. You don't need to own a car or a house, or even to meet people physically, before you can make and maintain professional contacts and friendships.

The investment management industry is still resisting this trend, although we do see the industry being pushed now to rethink their strategies and operations. We have identified four main trends that are in the process of breaking through, some that are almost mature and others still in the early stages but with high potential to disrupt not just how business is done at the surface level but the professional roles and even the norms themselves within asset management.

1. Blockchain

   Just as the invention of the elevator made people question how tall buildings could be, the invention of bitcoin is prompting questions about what ownership of a good really means. Blockchain, the technology invented to power bitcoin, allows asset ownership to be engraved permanently using a digital chain via millions of computers, instead of being kept on multiple registers owned by different reliable sources. This technology could spell the end of costly reconciliations between infinite custody systems, and also the end of Madoff-esque skulduggery, and even the end of accountants! But is it really safe? Can it really keep sensitive information restricted to authorised eyes only? It is in the testing stages by some banks who are trying to determine if it is. It may be hitting headlines sooner than we think. (Well, headlines it has already grabbed... check out this article about blockchain technology in Luxembourg).

2. Robo-advisors

   They can make investment decisions extremely quickly, without emotional bias, at very low cost... and 24/7: robo-advisors are taking the investment world by storm. Private bankers have already started investing in and using this technology with some success stories, and as artificial intelligence keeps getting smarter there is no telling how effective such robo-products may become. In fact, we may have already been tipped into a world where robo-advisors are...