Franklin Templeton, a global asset management firm with $1.5 trillion AUM, has announced its plans to launch a mutual fund natively on the Solana blockchain. The announcement came during Solana Breakpoint 2024 in Singapore, where Mike Reed, who leads Partnership Development at Franklin Templeton, delivered a keynote speech.
Franklin Templeton’s Journey Into On-chain Mutual Funds
At the Solana Breakpoint 2024 event, Reed outlined the firm’s decision to bring a money market fund on-chain. He also highlighted how blockchain technology has the potential to enhance operational efficiency in the financial services domain. “Our idea was to, you know, try and find operational efficiencies in our overall business by using blockchain technology,” Reed explained.
Franklin Templeton initially chose to launch a money market fund because of its transactional nature. According to Reed, this decision was strategic since money funds are deeply ingrained in the transactional economy, often featuring check-writing and debit card functionalities. He emphasized the need for an asset with high transaction volume to leverage blockchain effectively.
He stated, “We thought if we wanted to try and use the blockchain efficiently, we want to have as many ledger entries as we possibly could.” One of the distinguishing aspects of Franklin Templeton’s Solana blockchain project was its decision to develop the infrastructure internally.
“Rather than do this in kind of an inauthentic way by hiring an outside vendor to do the tokenization for us, we decided to build our own development team,” Reed stated. This development team created a digital wallet infrastructure and on-chain transfer agent, allowing the mutual fund to operate natively on blockchain rails.
However, when Franklin Templeton first launched its on-chain money fund, there was little external interest. At the time, interest rates were close to zero, making the fund less attractive to potential investors. “It turned out no one else was [excited], because our money fund at the time was yielding right around zero percent. So no one cared,” Reed noted.
As interest rates began to rise and market volatility affected regional banks, interest in the on-chain money fund grew. Moreover, the firm began to attract attention from venture capital firms and Web3 businesses looking for new ways to manage their treasuries. According to Reed, some clients wanted to use the fund as a funding mechanism for portfolio companies. This led Franklin Templeton to build additional functionalities, such as transferability.
Why Solana?
The highlight of Reed’s speech was the announcement that Franklin Templeton had filed to develop on Solana natively. Reed emphasized that Franklin Templeton mints tokens “authentically on chain” without maintaining an off-chain book of records.
“The record of ownership is the token itself. You own that token in your wallet and that’s your authentic record of ownership,” he said. Reed further praised Solana’s technical capabilities, including its speed and cost efficiency and stated, “The cost efficiencies of running the system on chain are a benefit to both us as a firm and to you as an end user.”
Furthermore, he also commended Solana’s development tools, calling them “second to none.” Earlier this year, the asset manager launched spot Bitcoin and Ethereum ETFs alongside BlackRock, Grayscale, and others. Moreover, they are also optimistic on a spot Solana ETF despite not having submitted a filing for the same.
