US asset management titan Franklin Templeton confirmed the debut of the government money fund ever in Europe to run on blockchain.
Key Takeaways
- Franklin Templeton unveiled the government money fund in Luxembourg, the first in Europe to use blockchain.
- The Luxembourg-based UCITS fund will run on the Stellar network.
- Identified as Franklin OnChain US Government Money Fund, it targets institutional investors in 8 European countries.
- The fund will operate on Stellar blockchain leveraging the proprietary transfer agency platform and co-managed by the team running a similar US-registered product unveiled in 2021.
- The fund aims to maintain the net asset value (NAV) at $1 through investment in federal government securities.
Franklin Templeton dives into the government money fund ever to operate on blockchain in Europe. Its launch marks the start of a new chapter in digitizing traditional finance.
The Jenny Johnson-led entity has welcomed the Franklin OnChain US Government Money Fund, which represents the fully tokenized UCITS product. Although domiciled in Luxembourg, the UCITS SICAV product is accessible to investors from Austria, France, Italy, Spain, Germany, Switzerland, Netherlands, and Liechtenstein.
The firm behind $1.4 trillion worth of assets under management (AUM) confirmed leveraging an in-house blockchain-enabled transfer agency for the fund. The fund utilizes the Stellar public blockchain, given that the technology deployed offers investors optimized transparency in transactions to sustain robust security measures.
Guaranteeing Capital and Liquidity Preservation
The primary objective of the Stellar-based government money fund is delivering high current income while guaranteeing capital and liquidity preservation. Like typical money market funds, the blockchain-based product targets $1 NAV to provide stability to the investors.
Pursuing these objectives is evident in the fund design to prioritize investment in US government securities. Among the assets the fund will pursue are fixed-rate, variable-rate, and floating-rate securities. Franklin Templeton added that the fund can undertake repurchase agreements collateralized using cash or US government securities.
The team managing the fund features experienced professionals assembled from multiple locations within Franklin Templeton. Additionally, the San Mateo-based CFA Shawn Lyons is set to co-manage the fund alongside the input of Boston-domiciled Michael Lima and Joanne Driscoll.
The composition of this team is essential given their involvement in overseeing the US-based version unveiled in April 2021. Similar to the Luxembourg-based product, The fund was the pioneer mutual fund in the US ever to leverage the public blockchain technology to process transactions and record share ownership.
The journey to establish the Luxembourg-based fund traces to October last year when Franklin Templeton secured regulatory approval. As such, the firm has established this fund under the Franklin Templeton OnChain Funds structure.
Why Blockchain Technology?
The choice of blockchain technology is not a coincidence, as it seeks to facilitate immediate transaction recording and verification. The feature guarantees real-time visibility of underlying fund activities and all ownership transfers.
The platform features multiple security layers to shield the investor assets and ensure confidentiality. Franklin Templeton confirms the integration of security measures into the blockchain infrastructure and transfer agency protocol.
The move to scale into blockchain-based funds in Europe leverages Franklin Templeton’s experience with similar products launched in the US market. Furthermore, the asset management firm has proven expertise in integrating traditional fund management and blockchain technology.
Franklin Templeton expects the fluid-structure to support the efficient processing of subscriptions and redemptions. The capability to automate verification and recording is a plus for the blockchain-based system.
The blockchain platform will grant institutional investors access to detailed transaction records. The resulting transparency will facilitate tracking investment performance and autonomous verification of transactions.
However, the newly established fund will comply with the existing UCITIS framework. Still, the fund prioritizes compliance with the regulatory requirements in Europe. The combo offers institutional investors diversification into the regulated investment vehicle that utilizes contemporary technology.
Editorial credit: rafapress / Shutterstock.com