Paris-based Mata Capital has put the first of its real-estate investment vehicles on a blockchain solution developed by ConsenSys in an attempt to add liquidity to transacting units in its funds.
Mata now manages €800 million and will manage over €1 billion by early next year, assuming it completes a proposed €220 million financing for its largest fund yet.
The firm currently manages 13 funds dedicated to strategies in real estate.
Baptiste Saint-Martin, Mata’s product development manager, says the firm has put a small, roughly €30 million fund on the Ethereum blockchain, more as an experiment, given its small size. The real test will come when the newest fund is launched on the platform.
Leading the way
For ConsenSys, the deal is a welcome deployment of a new suite of asset-management products it has developed called Codefi.
“Mata is leading the way,” said Lory Kehoe, Dublin-based country head and global head of strategic operations at ConsenSys.
Mata’s investors – all of whom are European-based professional investors, placing minimum ticket sizes of €100,000 – did not ask for the fund manager to adopt blockchain. However, they have been clamoring for more liquidity in the units of the funds they buy, and lower transaction costs when redeeming or exchanging these.
The firm decided to go with a blockchain-based solution partly because of regulation: in 2017, the French legislature passed a law allowing companies to maintain share registries on blockchain. This is the only legal way to have a fully automated solution: a normal digitalized solution would still require paper, because all property deeds in France must be physical – unless, as per the new law, they are logged on a blockchain.
It’s super-time consuming to onboard a client. You wouldn’t believe itBaptiste Saint-Martin, Mata Capital
But there are other reasons to attempt this. Issuing a new private-equity fund creates a lot of compliance. “It’s super-time consuming to onboard a client,” Saint-Martin said. “You wouldn’t believe it.” Codefi will, he hopes, automate the process.
Once that is achieved, it lays the groundwork for other asset managers to join the platform, in order to develop solutions such as KYC compliance that are costly to all market participants, but which don’t offer competitive advantages.
Another hoped-for benefit is that, by making share registry transactions peer-to-peer and electronic, Mata and ConsenSys will help develop a liquid, transparent and cost-effective secondary market in owning units in funds.
The project is not being used to tokenize actual assets in the portfolio; no properties are being tokenized.
For ConsenSys, for which asset management has been an important target segment, getting validation from a real-world use of its technology should open more doors. It developed Codefi as a suite of asset-management services. It includes fund administration, transfer agency, and custody for digital assets aimed at large banks.
The goal is to work with the likes of BNY Mellon and State Street to mainstream crypto-oriented solutions, says Kehoe. For example, ConsenSys hopes to work with State Street on fund administration, ultimately using blockchain to enable custodians to strike NAVs close to real time, instead of waiting for an end-of-day batch process.
But this requires real-time data, which won’t exist until there are enough asset managers delivering real-time fund reporting. So more Mata Capitals will lead to more attractive economics to traditional securities services providers to embrace blockchain.
Saint-Martin says that will depend on how the upcoming, large fund launch fares and how well it operates over the next 12 months. The metrics he’s watching include usage – to what extent investors engage in P2P trading of fund units – and cost savings for compliance and other administrative necessities.
The risk to Mata is that these don’t pan out, and it’s spent a good chunk of cash on vendor fees to ConsenSys (which Saint-Martin declined to enumerate). “But we believe in decentralized finance,” he said. “If this attracts other asset managers to join, this will be a huge step forward for the entire industry.”