Financial innovation hit by the big chill

CONTRARIAN INVESTOR

The big chill has descended on innovation within financial services and it is going to get much, much worse.

A nasty combination of tightening regulatory control, institutionalised group-think and an aversion to risk by the providers of investment services is slowly killing new ideas from upstart providers within the investment space. To understand the daunting challenges facing new entrants to this market, let us imagine two distinct scenarios. In our first scenario, a bunch of fund managers with a half decent track record of managing money in a big fund house decide to set up their own boutique. They start shopping around for a new fund, which has taken months to set up via the usual chain...