Investment management company Vanguard has just completed a significant implementation of blockchain technology. It is using blockchain to manage data for financial products and the largest mutual fund, the $800 billion Total Stock Market Index Fund. According to Forbes, it has been using blockchain to manage $1.3 trillion worth of index funds since February. To implement the index data distribution, Vanguard has partnered with the Center for Research in Security Prices (CRSP) and technology startup Symbiont, a partnership first announced back in 2017.
What is the Vanguard Group
Vanguard is one of the world’s largest investment management companies offering a wide selection of “low-cost mutual funds, ETFs, advice, and related services.” Beginning in 1975 and with around $5.2 trillion in global assets under management since January 31, 2019, Vanguard has more than 20 million of investors and about 17,600 employees in the US and abroad. It has “popularized mutual funds and exchange-traded funds for the common investor.”
Vanguard’s blockchain program has been designed by Symbiont, a New York startup and “market-leading smart contracts platform for institutional applications of blockchain technology.” Vanguard is using Symbiont to manage index data, but the startup offers solutions for the automation of mortgage loans, syndicated loans, private equity and crowdfunding, corporate debt and asset digitization.
What is Symbiont’s Index Data Distribution?
Symbiont’s blockchain software was used for the distribution of index data from the Center for Research in Security Prices (RSP) to Vanguard. Where in the past, Vanguard relied on manual data updates, with Symbiont’s software it has saved considerable time and improved processes. By partnering with Vanguard and the Center for Research in Security Prices (CRSP), Symbiont was able to show that its Assembly platform for streamlining index data distribution could share index constituent data created by CRSP and accessed by Vanguard. As Symbiont explains, “The solution was deployed on nodes run by Vanguard and CRSP connected in a truly decentralized network with a single source of truth.” This is very important for Symbiont: “The project has validated the implementation of Symbiont’s Assembly platform with two of the premier participants in the index market. It also represents a leap forward in the use of blockchain technology for strategic financial applications.”
Warren Pennington, head of Vanguard’s fintech strategies team, also highlighted the benefits of using Symbiont’s blockchain platform, Assembly, which has given Vanguard “a synchronized database that is constantly updated every time CRSP makes a change to the index. No more manual updates or manual pulling of data. No more manual reconciliations.”
With Symbiont’s blockchain acting as an “independent third party that hosts information securely across a network of computers,” clients feel more trust, and prevents “Vanguard from having to trust the startup to keep the data safe,” Forbes reported.
As Pennington said to Forbes, blockchain has a long way to go until it automates and replaces more complicated procedures such as clearing trades, but, “this project isn’t the end.”
Sources: Forbes, Vanguard, Symbiont, CCN.