DLT and Blockchain: Innovations in the Alternative Investments Sector

Of course, at BAI ever­y­thing revol­ves around the topic of alter­na­tive invest­ments, across asset clas­ses and stra­te­gies. Our appro­xi­m­ately 250 members repre­sent the entire value chain in profes­sio­nal asset manage­ment in the private debt, private equity, infra­struc­ture or liquid alter­na­ti­ves segments, i.e. asset mana­gers, banks, fund compa­nies, custo­di­ans and other service provi­ders such as law firms, invest­ment advi­sors or tax consultants.

In addi­tion to the mega­to­pic of sustainable finance, our indus­try is natu­rally also concer­ned with all facets of the future topic of digi­tal finance. On the one hand, it’s about using new tech­no­lo­gies along the value chain; distri­bu­ted ledger tech­no­logy (DLT), for exam­ple, is chan­ging and impro­ving many proces­ses and tran­sac­tions in the fund busi­ness. On the other hand, digi­tal assets and the toke­niza­tion of assets, for exam­ple, are opening up new invest­ment oppor­tu­ni­ties. We have also been accom­pany­ing this topic for a number of years and recent regu­la­tory deve­lo­p­ments at natio­nal and Euro­pean level have now given rise to the idea of laun­ching an Inno­va­ti­ons­Day in addi­tion to rele­vant webi­nars in order to create a special plat­form for tech­no­logy topics. In addi­tion to block­chain and crypto-assets, our event on Septem­ber 30, for exam­ple, will also focus on the use of arti­fi­cial intel­li­gence in asset management.

Our current agenda, which will conti­nue into next year, is of course domi­na­ted by the afore­men­tio­ned topics of sustainable and digi­tal finance. Various legis­la­tive acts have alre­ady been passed or are still in the regu­la­tory pipe­line, so that imple­men­ta­tion will be a major issue next year. Legis­la­tive proce­du­res are very complex and after the frame­work legis­la­tion, imple­men­ting acts, tech­ni­cal regu­la­tory stan­dards, natio­nal imple­men­ta­tion laws, etc. regu­larly follow. In the area of sustainable finance, we are talking about very detailed, tech­ni­cal and granu­lar requi­re­ments that take on a level of comple­xity and, unfort­u­na­tely, also bureau­cracy, which causes the indus­try a lot of trou­ble and which we also try to coun­ter­act so that the accep­tance of sustainable inves­t­ing does not suffer. Prag­ma­tism is called for here.

In the field of digi­tal finance, as alre­ady briefly outlined, block­chain tech­no­logy opens up many new possi­bi­li­ties for use and appli­ca­tion. Fund compa­nies and asset mana­gers will have to take a hard look at how they use this tech­no­logy and how their proces­ses and systems, inclu­ding risk manage­ment, need to be aligned with it in the next year at the latest. There are new market play­ers and service provi­ders, big chan­ges are coming in the market. We will present the chal­lenges facing insti­tu­tio­nal invest­ment in the coming year as part of our annual BAI Inves­tor Survey in the fall.

The AIFMD review is indeed a key topic that is coming up soon. The EU Commis­sion will present a draft amend­ment direc­tive in the fall, which may be more compre­hen­sive than expec­ted by the indus­try and inves­tors. This is because the AIFM Direc­tive has proven itself in prac­tice and there are no syste­ma­tic or funda­men­tal weak­ne­s­ses that need to be addres­sed. From the point of view of the Commis­sion, which is partly guided by sugges­ti­ons from the Euro­pean secu­ri­ties regu­la­tor ESMA, the follo­wing topics, among others, are to be addres­sed in the review: Intro­duc­tion of an EU regu­la­tory frame­work for credit funds, further harmo­niza­tion of the requi­re­ments for depo­si­ta­ries, revi­sion of the regu­la­ti­ons on outsour­cing, liqui­dity manage­ment and reporting.

At the same time, the EU Commis­sion will also present propo­sals for revi­sing the ELTIF (Euro­pean Long-Term Invest­ment Funds) Regu­la­tion. This Euro­pean fund format for long-term invest­ments is to be desi­gned in a more prac­ti­cal way. So far, accep­tance in the indus­try is still lack­ing, although the idea and concept are actually correct and the ELTIF is also open to private inves­tors. Various member compa­nies alre­ady use this format, but there is a need for opti­miza­tion. The BAI has alre­ady closely accom­pa­nied the adop­tion of the AIFM Direc­tive and will again play an important role for the indus­try in the amend­ment. Our members always have the oppor­tu­nity to get invol­ved in important asso­cia­tion work through our tech­ni­cal committees.

About Frank Dornseifer
Frank Dorns­ei­fer is Mana­ging Direc­tor at Bundes­ver­band Alter­na­tive Invest­ments e.V., Bonn, and has been active in invest­ment, capi­tal market and corpo­rate law in various func­tions for more than 20 years. After his studies in Bonn, Dublin and Lausanne, he worked as a lawyer in an inter­na­tio­nal law firm in the areas of corpo­rate and secu­ri­ties law. He then worked for seve­ral years as deputy head of unit at BaFin in the Invest­ment Super­vi­sion Policy Unit and as a repre­sen­ta­tive on the Invest­ment Manage­ment Commit­tee of the Orga­niza­tion of Inter­na­tio­nal Secu­ri­ties Commis­si­ons (IOSCO) before moving to BAI in 2007, where he has since mana­ged and coor­di­na­ted the association’s acti­vi­ties. He is the author of nume­rous specia­list publi­ca­ti­ons on invest­ment and corpo­rate law and editor of commen­ta­ries on the KAGB/InvG and the AIFM Direc­tive. The Finance Commit­tee of the German Bundes­tag and the Euro­pean Parlia­ment have appoin­ted him seve­ral times as an expert in legis­la­tive proce­du­res on capi­tal market law.