Institutions square up to the retail challenge
The economic boom of recent years has created a large class of wealthy individuals with money to spare. These high-net-worth individuals now form the most enticing target market for fund managers. Meanwhile the internet is democratizing financial services, in the process opening the markets up to a swathe of new private investors. The pile-it-high, sell-it-cheap supermarket philosophy which has already swept through the US is now set to engulf the rest of the world. What does this mean for the markets? Julian Marshall reports
"The whole world of financial services is going retail and, if people fail to realize that, their business will be dead." In saying this Chase Manhattan's Mark Tennant, who runs its European global fund services division, neatly sums up the biggest challenge facing the investment world today.
The rush of money into retirement savings, coupled with the rapid spread of the internet is creating a huge source of new funds. Meanwhile at the wealthier end of the market, the number of millionaires with large of amounts of money free to invest is increasing dramatically.
The old institutional investment market, while far from disappearing, is consequently falling in relative significance. As Tennant points out: "The institutional market will continue to grow but retail will grow twice as fast and the high net worth individual market will increase at four times the speed and possibly more."
Peter Gibbs, head of Europe at Merrill Lynch Investment Managers, agrees that this end of the market will see the biggest expansion.