Should You Be Paranoid About Google and Amazon?
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Friday, July 10, 2015

Should You Be Paranoid About Google and Amazon?

Your fundster brethren are bracing for disruption: a disruption of the technology industry flavor.

In the executive summary of a report slated to be released mid-month, giant custody bank State Street found that 79 percent of asset management executives surveyed "say they will face direct competition from non-traditional market entrants." Yet maybe the disruption will be more on the distributor and platform side of the business instead.

"Technology players like Google, Apple and Alibaba Group could mount a serious challenge. Asset managers also find themselves competing with their clients' own investment talent, as large investors bring more asset management in-house," the State Street team writes in the sneak-preview-style executive summary of the upcoming report, which is called "Opportunities for Optimism? A New Vision for Value in Asset Management".

Chris Newlands of the Financial Times points out that non-traditional players like Alibaba and Tencent have already entered the space in China by "distributing asset management products."

"I am the CEO and am paid to be paranoid, and I am paranoid about this. The big danger for companies like ours is we become complacent and believe our business is safe forever. It's not," Martin Gilbert, CEO and co-founder of Aberdeen Asset Management [profile], tells the FT. "Having said that, it costs us £500m a year to run our business — and that is a big commitment, even for Google. I do not see them manufacturing funds but I can see them coming in and distributing funds."

"Google and Amazon entering the market is a real possibility," Helena Morrissey, CEO of British shop Newton Investment Management, tells the FT. "The trouble is, we as an industry always seem to be behind the curve on these things, but it is good that people are worried, as it will sharpen up our act."

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