Fundnode: From efficiency to new business models — Funds market infrastructure 2.0
Background and introduction
Singapore remains a leading international financial centre in Asia, with S$4.9 trillion of discretionary and advisory assets under management (AUM) in 2022. To strengthen and maintain Singapore’s position as a full-service international fund domiciliation and asset management hub, several national initiatives are underway to develop supporting financial market infrastructure and developing market-leading capabilities.
The Monetary Authority of Singapore’s (MAS) refreshed Financial Services Industry Transformation Map (ITM) 2025 outlined five key strategies for Singapore. These include: i) enhancing asset class strengths, ii) fostering a skilled and adaptable workforce, iii) catalysing Asia’s net-zero transition, iv) shaping the future of financial networks, and v) digitalising financial infrastructure.
Within funds, the need to improve funds settlement infrastructure and processing was validated as a key need by the Singapore Funds Industry Group (SFIG), an industry group co-chaired by MAS and an industry representative, bringing together stakeholders across the entire asset management value chain.
In August 2022, Marketnode was announced as the operator for Singapore’s fund settlement infrastructure on blockchain, Fundnode, which has subsequently gone live in Q2 2024.
On the back of industry demand, Fundnode standardises and streamlines fund messaging and processing. Furthermore, tracking the lifecycle on a common ledger provides a single source of truth for transactions and record-keeping. Through Fundnode, participants experience shorter settlement times, reduced errors, and streamlined workflows.
Through this white paper, we hope to share our experiences and address three key questions:
What are some considerations when building a national level market infrastructure?
Besides efficiency, what other pain-points could a new infrastructure alleviate?
How can this new infrastructure enable new business models?
Fundnode: What and why?
A key design principle at Marketnode is to actively solicit feedback and co-create in partnership with the ecosystem, which includes fund managers, distributors, service providers, and intermediaries.
Some key challenges outlined by the industry were:
Long settlement times: Settlement times remain long at T+8 to T+10, whilst cash products are moving to T+1
No structured data standards: No established industry standards for communication between distributors and service providers
Manual workflows and intensive reconciliations: Highly manual workflows requiring co-ordination across multiple user interfaces and parties, leading to intensive reconciliation
Reliance on faxes and emails: Reliance on ‘old school’ technologies without much process improvement and digitisation
Operational staff bottleneck: Difficult to scale current operations without hiring additional operational staff
On the flip side, several game changing trends have emerged:
New fund formats: Rise of digital share classes to support and distribute tokenised real-world assets (RWAs), which saw Blackrock’s $BUIDL and Franklin Templeton’s $BENJI, collectively manage ~US$800 million AUM to date
Personalised portfolios: Increasing use of digital platforms to serve hyper personalised portfolios, such as JP Morgan’s acquisition of 55ip to power a 16-fold increase in its separately managed accounts segment AUM
Fresh demand for alternative investments: Rethinking alternative investments allocations to instead become a core portfolio pillar, which saw Blackstone’s strategic push to expand their private wealth business in Asia and JP Morgan Asset Management’s partnership with iCapital
How can we solve today’s challenges with a view towards tomorrow’s solutions?
Case study on digitisation: Today’s challenges
Today, nearly 80% of Singaporeans invest in some kind of financial product, with Collective Investment Schemes (CIS), or mutual funds, forming a large part of their portfolio mix. Singaporeans can use their cash savings, Central Provident Fund (CPF) monies, or Supplementary Retirement Scheme (SRS) monies to invest into mutual funds. In Singapore, the size of CIS funds stands at around S$100 billion.
Challenges in the current system
Whilst some parts of the investment process have been modernised (e.g., online investment platforms, mobile apps, etc.), others still use legacy infrastructure. Further, the end-to-end process requires an extensive network of bilateral relationships and communications.
For example, in the case of a CPF subscription workflow, investors can subscribe to funds with a click of a button. These electronic orders are then converted into physical faxes, before being faxed back and forth for further processing by the fund houses and their agents.
This ‘spaghetti problem’ leads to many of the key challenges identified in the previous section, such as long settlement times, need for intensive reconciliations, amongst others.
‘Spaghetti problem’ with multiple networks and diverse communication protocols
The solution: Centralised funds market infrastructure
To address these challenges, Fundnode has been developed as a centralised funds market infrastructure connecting all funds ecosystem participants. We note that this model has also been successful in other markets such as Indonesia’s S-INVEST and South Korea’s Fundnet, to highlight a few examples.
Today, Fundnode enables seamless digital workflows, standardises messaging and communications, and is compatible with all three funding avenues (i.e., cash, CPF monies, or SRS monies).
Centralised funds market infrastructure, Fundnode
In May 2024, Fundnode successfully went live with our first phase, with straight-through processing and settling of fund cash orders for our network of on-boarded participants. Over H2 2024, Fundnode will enable processing for fund orders paid with CPF and SRS monies.
Key benefits experienced via Fundnode
Reduced settlement times: By streamlining and digitising the order placement process, Fundnode reduces the settlement times for fund orders from T+7 to T+2, enhancing liquidity and agility
Elimination of manual workflow and reduced reconciliations: By replacing the manual fax-based system with a digital platform, Fundnode minimises the risk of errors and reduces administrative costs
Improved data consistency: By leveraging a unified infrastructure architecture, Fundnode ensures that investor holdings information is consistently and securely maintained
Moving from digitisation to digitalisation: Tomorrow’s solutions
Fundnode has also been designed to be future ready and future proof. We present below our phased approach to move from digitisation to digitalisation:
Phase 1: Create comprehensive infrastructure to support a target operating model
Phase 2: Enable multi-format (e.g., VCC, collective investment schemes, etc.) and multi-venue distribution models (i.e., traditional, digital, hybrid, etc.)
Phase 3: Build out distribution networks through partnership with traditional incumbents and non-traditional distributors (e.g., Web 3 native venues, etc.)
Fundnode’s end-state: Multi-format, multi-venue
About Fundnode
Fundnode is Singapore’s investments fund infrastructure on blockchain, providing the funds ecosystem with a single platform for transaction management, funds processing, and record-keeping.
Fore more information: https://www.marketnode.com/fundnode