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NEW YORK–(COMMERCIAL THREAD) – The structural issues that challenge today’s capital markets could be addressed by creating a new type of registered investment token that embeds smart contracts into a blockchain harnessing artificial intelligence (AI) and big data technologies to administer contract terms and enforce various investor and issuer rights, Citi’s business advisory services find in their new survey, Industry Revolution – Investment Management in 2033, Part 1: The new building blocks. The new investment instruments, dubbed Ownits and Corpits, could change the fundamental concept of real asset ownership and the relationship between investors and companies, according to the survey’s findings.
Citi Business Advisory Services has partnered with Citi Ventures to solicit contributions from innovation leaders from large investment firms, venture capital organizations focused on fintech, a wide range of emerging companies, academics studying the new platform economy, and other experts focused on the intersection of investment management and emerging technologies. The report, based on 60 exclusive interviews – is part one in a two-part Revolution series – and introduces the new building blocks that can move stocks and bonds over time.
“The industry as a whole is facing a demographic challenge related to the growing needs of retired baby boomers, working millennials and the expanding global middle class. We are moving from a situation where the majority of assets are institutionally directed to one where an increasing share of assets come from individuals, â€said Sandy Kaul, global head of business advisory services. “A majority of this individual wealth is held by investors who do not have the right to access private investments, which limits their ability to obtain a return and diversification to help finance the extension of hope. of life.. “
The survey focuses on three innovation trends which together provide a model for dealing with this situation. Crowdfunding presents asset owners who choose to sell all or part of their assets to an outside entity. Unifying such investment opportunities divides these assets into pieces small enough that average investors can afford to buy and sell such exposures. Tokenization of these units then makes it possible to memorize the terms in contracts which can be divided into smaller and smaller fractions to facilitate liquidity.
“Behavioral changes and technological advancements such as blockchain and AI are accelerating and are irreversible, not only in the investment landscape, but across industries. It is by thinking about how new behaviors and technologies might come together that one can envision the possibility of entirely new solutions and gain a competitive advantage, â€notes Vanessa Colella, Head of Citi Ventures and Chief Innovation Officer. from Citi.
Citi’s investigation presents a framework for how these emerging technologies could be combined to create a digital token that combines financial rights, property rights, and use rights to create a new kind of liquid property unit. or “Property”.
“The appeal of Ownits is not just its regulatory transparency, but how it fits into the current ecosystem of primary issuance and secondary trading,†Kaul added. “This could allow individuals to create very diverse portfolios that cover not only stocks and bonds, but also art, infrastructure, wine, intellectual property rights and more.”
The report also exposes the case of a second type of registered token, extending the Ownit model to companies: these Corporate Exposure Units are nicknamed Corpits.
“There has been a significant drop in the number of listed companies over the past 20 years and in the total number of IPOs. Concerns about increased short-termism in public markets and access to nearly $ 1 trillion of dry powder in private equity markets are encouraging more companies to stay private, especially smaller companies that offer the greatest potential for growth, â€Kaul notes. “This limits opportunities for individual investors and makes it more difficult for employees of private companies to monetize their equity stake..”
The types of smart contracts built into the envisioned Corpit would be different, according to the report. The financial measures taken by the company could be linked to the milestones of the growth plan or to the behaviors of a company in key areas such as environment, social and governance or diversity. Bonds are likely to extend to investors as well. For example, different categories of companies could specify different minimum holding periods – from daily to multi-year – and offer proportional variations in voting rights.
Companies could also be used to provide exposure to different elements within a company that are currently untargetable, such as their individual business units or their supply chain.
As the platform economy grows, the survey reveals that companies are embracing permeability. New business models such as crowdsourcing are taking hold in the company and intangible assets are becoming increasingly important sources of differentiation.
“By breaking down a company into a portfolio of investment options, we might see a blurring of the lines between venture capital, private equity and public market investing. This could allow a better construction of the portfolio and an explosion of new investment opportunities â€, concludes Kaul.
Citi, the world’s largest bank, has approximately 200 million accounts receivable and operates in more than 160 countries and jurisdictions. Citi provides consumers, businesses, governments and institutions with a wide range of financial products and services, including consumer banking and credit, business and investment banking, securities brokerage, wealth management and transaction services.
Additional information can be found at http://www.citigroup.com
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