We recently hosted an idea dinner on “Disruptive Companies in the Asset Management Industry”.
The most attractive industries to disrupt are highly profitable ones, and asset management is traditionally a highly profitable industry. IMHO, the most successful disrupters in this area to date have been Vanguard (who popularised index funds) and the ETF industry. We thought it would be interesting to brainstorm about what are the next great ideas and companies that will/can disrupt this sector, based on the ideas on Clayton Christensen’s “Innovator’s Dilemma”. The dinner included a cross-section of senior finance executives and experienced tech entrepreneurs. I’ve attached below the notes from the dinner in slideshow format.
For this who don’t flip through the slideshow, here are the highlights:
What Do Investors Value? (What Jobs Does the Investor Want Done?)
•Investment Team Stability
•Relationships with other investors and investment teams
•Job security (of the investor)
•Exposure to target sector (e.g. China, commodities)
Examples of Disruptive Innovation in Asset Management
•Structured products which minimize downside
•Investing in new asset classes: domain names (Oversee.net), equity-like student loan instruments (MyRichUncle), litigation (Law Finance), patents (RPX), etc.
•Credit Default Swaps
•Crowdsourced financing: Indiegogo/Kiva/Kickstarter
Examples of Sustaining Innovation in Asset Management
•Quant hedge funds
•Private company markets
–Allows exposure to investment themes (eg, “I want to invest in African oil expansion”
New Asset Classes in Which Some Are Investing
–Frequent flyer miles