The Alternative Investment Space (NAICS 5239)
Chart 3 depicts Connecticut's growth is coming from the "alternative space." The three main sub-components of the securities industry are Securities and
Commodity Contracts Intermediation and Brokerage (NAICS 5231), 10,666 jobs, 51.1% of investment jobs, 4.0% growth since 2000; Securities and Commodity Exchanges (NAICS 5232), 261 jobs, 1.3% of investment jobs, -52.1% job drop on a small base, NASDAQ downsizing; and Other Financial Investment Activities (NAICS 5239), "the alternative investment space," 9,951 jobs, 47.7% of Connecticut investment jobs, a nice 79.2% job gain. Boutique investment firms are taking advantage of baby boomers looking to their retirement needs and high net-worth individuals searching for the best risk-adjusted returns.
The industry is responding to more individual customer need, not just the mass market. Free movement of capital and the growing in-state capital accumulation shows that Connecticut's environment is ripe for more wealth creation.
Technological innovation and implementation comes from regions of capital accumulation. And investment from accumulated capital will help sustain growth better in the long run than the credit-stimulated housing demand of late, despite some recent hedge fund failures from excessive risk taking rather than prudent investment.
Connecticut's Premier "Long Tail" Industry - An Emerging Force
"The Long Tail is a powerful new force in our economy: the rise of the niche"(2) or industry prospering by moving from mass markets to niche markets. Other Financial Investment Activities perhaps exemplifies the ultimate "Long Tail" industry for Connecticut. Wired Magazine Editor-in-Chief Chris Anderson wrote of the "Long Tail" in 2004, which offers an alternative look at the future of different markets and how the Web influences them. It was first used to describe some entertainment industry trends evolving from the Internet, but could it be applied to economic development in all industries as well? Are markets and industries shifting from mass markets limited by singular blockbuster appeal (mutual funds) to unlimited markets distributed with lowered cost or enhanced expertise in the tail or the niche (hedge funds)? High net worth (accredited investors) and boutique investment are about as niche market positioning as one could get. Connecticut's "long tail" investment industry make-up and expertise are constantly evolving and pushing out and down the niche part of the curve (see CT's Long Tail graph on page 7).