Fund-Level Asset Custody

Manual reconciliation between fund administrators, custodians, and transfer agents is a major cost center and error source. A shared, immutable ledger provides a single source of truth for all parties, automating reconciliation.

• Real Example: A private equity fund reduced its monthly reconciliation time from 120+ person-hours to near-zero by tokenizing fund interests on a private blockchain.
• ROI Driver: Direct reduction in back-office FTEs and elimination of costly reconciliation software licenses.

Regulatory audits and internal compliance checks are time-consuming and often rely on sampling. Programmable compliance and an immutable transaction history enable continuous, real-time auditing.

• Real Example: A venture capital fund uses smart contracts to enforce investor accreditation status and ownership caps automatically, creating a perfect, tamper-proof audit trail for the SEC.
• ROI Driver: Dramatically reduced legal and audit preparation costs, with the ability to prove compliance instantly.

Traditional capital calls and distributions involve slow, manual processes across banks, custodians, and investors. Tokenized ownership and smart contract automation execute these events programmatically.

• Real Example: A real estate fund cut capital call settlement times from 5-7 business days to under 24 hours using a blockchain-based system, improving fund liquidity.
• ROI Driver: Faster capital deployment, reduced idle cash drag, and improved investor satisfaction through transparency and speed.

Proving the chain of custody and authenticity of underlying assets (e.g., art, intellectual property, private debt) is complex. Non-fungible tokens (NFTs) and on-chain registries create an unforgeable provenance record.

• Real Example: A fund specializing in film royalties tokenizes rights ownership, providing investors with clear, immutable proof of their stake and automating royalty distributions.
• ROI Driver: Reduces legal disputes over ownership, enhances asset valuation through provable scarcity, and opens new asset classes to fund structures.

Concentrating assets with a single custodian creates systemic risk. Decentralized custody models, like multi-party computation (MPC) or distributed ledger technology (DLT), distribute control and eliminate single points of failure.

• Real Example: A family office uses a regulated digital asset custodian with MPC technology, ensuring no single employee or system can unilaterally move assets, significantly reducing internal fraud risk.
• ROI Driver: Lower insurance premiums, reduced operational risk capital reserves, and stronger investor confidence.

Illiquid assets like real estate or private equity lock up capital for years. Tokenization allows these assets to be divided into smaller, tradeable units on secondary markets, while maintaining full compliance.

• Real Example: A commercial real estate fund tokenized a $50M property, allowing accredited investors to buy fractional shares. This expanded their investor base and created a path for secondary trading.
• ROI Driver: Access to new investor demographics, potential for premium valuations due to increased liquidity, and new fee structures from secondary market activity.

Replace manual, error-prone reconciliation with a single source of truth. Every transaction, from capital calls to distributions, is immutably recorded on-chain.

• Eliminate Reconciliation Costs: Automate the matching of GP statements, LP confirmations, and bank feeds. Firms report up to 80% reduction in back-office operational overhead.
• Real-Time Auditability: Provide auditors with read-only access to a verifiable, tamper-proof ledger, cutting audit preparation time from weeks to days.
• Example: A $10B PE fund reduced its quarterly close process from 14 days to 3 days by implementing blockchain-based reconciliation.

Encode fund governance and regulatory rules directly into smart contracts for programmatic compliance.

• Eliminate Manual Checks: Automatically enforce subscription agreements, transfer restrictions (e.g., ERISA, AML), and concentration limits. Transactions that violate rules are prevented at the protocol level.
• Reduce Regulatory Risk: Create an immutable record of compliance actions, providing a clear defense in examinations. This is critical for SEC Rule 206(4)-2 (Custody Rule) adherence.
• Example: A real estate fund automated its accredited investor verification and ownership cap management, ensuring zero compliance breaches during a rapid capital raise.

Unlock trapped capital by tokenizing fund interests, enabling controlled secondary markets and new investor segments.

• Create New Fee Streams: Facilitate secondary transactions with automated transfer agent functions, capturing fees on a previously illiquid market.
• Attract Digital-Native Capital: Access family offices and HNWIs seeking exposure to alternative assets with lower minimums and enhanced liquidity prospects.
• Risk-Managed Pilot: Start with a side-car vehicle or a single asset class (e.g., a portfolio property) to test liquidity dynamics without disrupting the main fund structure.
• Example: A venture fund created a tokenized feeder fund, attracting $50M from a new cohort of tech-savvy LPs and generating 75 bps in annual secondary servicing fees.

Safely leverage decentralized finance protocols to generate yield on idle cash and stablecoin reserves, directly from the custody wallet.

• Automate Cash Management: Program smart contracts to allocate idle USDC to vetted, low-risk yield strategies (e.g., Aave, Compound) based on treasury policy.
• Enhance Fund Returns: Add an estimated 2-5% APY on cash balances, directly boosting NAV. All activity is transparent and recorded on-chain for LP reporting.
• Key Requirement: This phase requires robust, institutional-grade DeFi risk management frameworks and multisig governance for transaction approval.