I think back a few years and a consistent theme was being debated at investment conferences I attended. The theme was the imminent challenge of the tech industry to asset management. The oft cited example was fictitious Amazon Asset Management. Imagine the distribution power of an organisation so omnipotent in our buying of consumer products. Sitting alongside latest bestselling book or kitchen appliance is a range of financial products to add to your pension, or a solution that wraps all of your financial needs from paying day to day bills, saving for your children’s education and securing your nest egg for retirement.
Notwithstanding the frequency with which this topic was discussed, the idea seemed to fade and today the large asset management firms hold onto their dominance in the realm of investing for retirement. That is not to say that the industry is not without change. The growth of fiduciary management or outsourced CIO, depending on which side of the Atlantic you are, has certainly shaken the traditional demarcation of asset managers, investment consultants and indeed pension schemes themselves, with each of these groups taking on functions previously the domain of the other providers. On the back of growth of DC pensions nudged into action via auto enrolment and with it the formation of Master Trusts, we have seen competition from non investment organisations challenging for share of wallet. So there certainly seems to be scope for disruption in the industry.
Against this backdrop of potentially radical change in the investment industry, I was interested to read the leader in this week’s Economist.[1] The piece talks about the forthcoming listing of the Ant Group. I was amazed to read that it could potentially be the largest IPO ever, putting its value on par with JP Morgan Chase. Where have I been or doing that I have never before heard of the Ant Group? To allay (or compound) my fears as to my ignorance, I texted a couple of friends in the industry to sense check knowledge of the Ant Group.
The key features of the Ant group is its focus on digital finance and its reach – it has over 1 billion users and was responsible for $16 trillion of transactions last year. The thing that struck me about the article was the sentence “users can borrow money, choose from 6,000 investment products and buy health insurance”. That seems one large step towards the Amazon model mentioned above. Admittedly from an investment perspective it is more akin to a platform rather than the actual manager of investments, but it wouldn’t take much more of a leap to offer index or systematic style investment strategies – given broad market exposure, with plenty of capacity and cheaply.
I have just heard back from my two texted friends. It would seem I am the only person on the planet not to have heard of the Ant Group. Note to self, pay more attention to global financial markets!
[1] The Economist, October 10th – 16th 2020, “China’s fin tech champion, On the March”
