While mutual funds have streamlined their operations through decades of standardization, tender offer funds remain burdened by complex paperwork requirements that seem antiquated in today’s digital age. The disparity highlights a fundamental difference in the processing framework and operational structure.
The Complexity Gap
Traditional mutual funds operate under well-established regulatory frameworks with standardized processes for daily pricing and redemptions. Decades of operational refinement have eliminated much of the administrative friction, making transaction processing almost instantaneous.
Tender offer funds have a more complex purchasing process and, unlike there interval cousins, have flexibility in the amount tendered and the timing of those tenders. This flexibility comes at a cost: extensive documentation requirements, including a subscription document at purchase and paperwork for tenders. These tender funds would benefit from a digital infrastructure & direct connectivity to the existing ecosystem – wealth managers, asset managers and administrators.
The Blockchain Solution
Imagine a world where purchases and redemptions in tender funds are as simple (operationally) as traditional mutual fund. This step requires a digital infrastructure ‘rails’ that enable real-time transaction processing that is currently plagued by pdf’s and spreadsheets. A ‘clearing’ process would drive efficiency and would even minimize the exchange of securities between counterparties through automated netting. Private permissioned blockchain provides immutable transaction records, automated compliance reporting, and more traditional settlement capabilities by inter-connecting the existing eco-system participants.
This move will replace the paper/pdf workflows with smart contracts and transaction nodes that automatically execute tender offers, calculate pro-rata allocations, and generate regulatory reports. Manual processing becomes a thing of the past.
The infrastructure technology already exists — its time tender funds caught up with the digital age.