Like many other protocol providers, the first limit is around regulation. There are certain fund laws that are not fit for modern technology. Some of the current laws were simply created in a different time, without consideration of all available technology available. As an example, most funds today must have a custodian and fund administrator by law.
A custodian typically acts as safe-keeper of the fund’s assets and the fund administrator typically takes care of accounting, auditing, risk management, compliance (KYC/AML), investments/redemptions and regulatory reporting.
On top of that, it is pretty standard practice that for every investment professional in a medium-sized investment fund, there will be four non-investment professionals (ie. legal, support, operational, fund-administrator focused, trade reconciliation, custody, risk management, auditing… and the list goes on).
We will automate the fund administration and support function entirely by smart-contract code and allow investors to own verify custody of their assets at all times.
There is no reason why regulation shouldn’t catch up to technology.
Another limitation is that today, the range of traditional investment fund assets, like fiat currencies and equities, aren’t available on a blockchain. A fund that operates in a technology regulated environment will have to use modern digital assets like tokens and can’t deal with paper-based certificates.
However, traditional assets are fast becoming tokenized and we’re just getting started.
It’s just a matter of time before every asset class we know will be digital simply because it is more efficient, transparent and secure. In which case, it’s not too long until we can imagine a fund management world which is entirely run by digital rule-sets and transparent processes.