Google, it seems, has sent ripples of incipient panic through the global fund management sector after commissioning research on how it could enter the asset management industry.
The research firm it approached (which can’t be named for confidentiality reasons) has quite a record of helping big companies break into new markets. The internet colossus told FT journalist Madison Marriage last week that it holds “no plans to get into the asset management or funds business.” But that hasn’t eased the tightly squeezed adrenals of large fund groups, who are frankly struggling to keep abreast of evolving technology (something that PwC warned about in January: this is one failure that opens the door to tech-savvy enterprises like Amazon, Twitter and Apple to walk right through).
As a measure of the alarm being felt, a senior executive from a big American fund company told the FT earlier this year that the prospect of Google muscling in on fund management was its “biggest fear”, while last month Graham Kellen, technology chief at European fund giant Schroders, said: “Obviously this is something we as an institution are concerned about [and] continue to monitor.”
The anxieties are not entirely misplaced: Google is no longer just a search engine ranking online content. It already invests in financial assets like Government bonds and its venture capital firm has invested in over 190 companies. It even launched a major trading operation with a bank-style trading floor in 2010 to manage its gigantic stash of moola more efficiently.
But how realistic is such a move into fund management? Catherine Tillotson, managing partner at wealth management consultancy Scorpio Partnership, thinks it pretty remote. The industry is intensely regulated, she noted, and not easy to enter:
“There probably is a subsection of investors who would have confidence in Google, but I think the vast majority of investors want a relationship with an entity which can supply them with high quality information, market knowledge and a view on that market. I think it is unlikely they would turn to Google for those qualities.”
But there’s another possibility: goliaths like Google could multiply their profits by distributing other people’s funds. As David Stevenson, Baring Asset Management’s business development chief, put it:
“Would I buy a Google fund? No. But would I buy a fund distributed by Google? Absolutely.”