Investment funds provide an opportunity to do something collectively that would be more expensive or difficult to do individually. UK funds now manage £1.4 trillion on behalf of investors as part of the wider UK investment management industry, which is responsible for almost £10trn. Over the decades, the fund has evolved to meet the modernising drivers of investor behaviour and technological change.
Fund 1.0, characterised predominantly by a focus on active management through individual security and wider asset allocation, has given way to Fund 2.0, which has seen technology facilitate the emergence and significant evolution of both indexation and the Exchange Traded Fund (ETF).
As technological change accelerates dramatically in the era of blockchain and distributed ledger technology, this paper looks at three potential scenarios of what lies ahead. We ask whether the investment fund of the future – Investment Fund 3.0 – will become a more efficient version of Investment Fund 2.0, or if the concept of the fund itself may be transformed.
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