Vanguard successfully tests blockchain for market data

Index provider issued data to the funds using the distributed ledger technology to reduce human error

Vanguard, the $5tn asset manager, has completed a blockchain technology project to provide a range of its index funds with up-to-date market data.

As part of a pilot project lasting several months, the world’s second largest asset manager used the distributed ledger technology, which underpins cryptocurrency bitcoin, to feed funds with market information and eliminate the need for manual updates.

Currently, the transmission of index data, such as changes to important company information, relies on multiple parties and distribution channels. It can also often require manual updates, which increases the risk of human error occurring.

Vanguard partnered with the University of Chicago Business School’s Center for Research in Security Prices — the indices of which Vanguard uses for the funds trialling the new technology — and New York-based technology provider Symbiont for the project.

During the testing phase, CRSP distributed daily index data to 15 Vanguard funds through Symbiont’s blockchain platform.

Warren Pennington, a principal in Vanguard’s Investment Management Group, said: “Using this platform, investment managers will be able to instantly distribute, receive and process index data, resulting in better benchmark tracking and significant cost savings that potentially results in better returns for our clients.”

Vanguard’s blockchain pilot comes as other investment giants begin to explore the benefits of using the technology.

AQR, the $208bn quantitative hedge fund, recently told Financial News it is looking into the potential uses of blockchain for trading, while Dutch pension funds APG and PGGM are working on a project to use the technology to reduce the cost of back-office administration.

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In February, Northern Trust and IBM built a blockchain to modernise the administration of a private equity fund managed by Unigestion.

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