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Franklin Templeton Investments, a U.S.-based asset management company, is seeking to use the Stellar blockchain for a new fund.
The firm on Tuesday filed a preliminary prospectus for the Franklin Blockchain Enabled U.S. Government Money Market Fund. According to the details, the fund’s shares would be recorded on the Stellar network. This, however, is subject to the approval from the Securities and Exchange Commission (SEC).
It is important to note here that the fund will not invest in cryptocurrencies. Only the ownership of the fund’s shares will be recorded on the Stellar network in addition to the traditional book-entry form.
“In the future, the ownership of the Fund’s shares may be maintained and recorded solely on the Stellar network, although there is no guarantee that this will occur. The Fund will not invest in any cryptocurrencies (referred to as, among other things, virtual currencies),” the prospectus reads.
As per the details, the fund would try to maintain $1 share price and invest “at least 99.5% of its total assets in Government securities, cash and repurchase agreements collateralized fully by Government securities or cash.”
Currently, investors can only purchase or redeem shares of the fund directly through the asset manager’s online app but not on the secondary trading market.
Franklin Templeton believes that blockchain-based shares will provide “increased transparency to Fund shareholders and may, in the future, permit reduced settlement times and provide other benefits to Fund shareholders.”
The company also said that although it has experience in managing mutual funds and risk oversight, it has limited experience in blockchain technology, adding:
“On account of these risks, the Fund may never achieve market acceptance and may not be able to attract sizable assets or achieve scale. Under these circumstances, the investment manager and the Fund’s board of trustees may take actions including, potentially, restructuring or liquidating the Fund.”
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