Today's financial crisis is producing ever higher unemployment, investment losses, and home foreclosures. People now recognise that the unthinkable is thinkable, be it in the banking system or in the real economy. Yet some big structural changes, that are about to play out, have not as yet attracted sufficient attention - including the approaching shrinkage and consolidation of the industry that provides investment management services to individuals, companies, pensions, and governments round the world.

Two distinct yet inter-related drivers are at work. First, collateral damage from the largely self-inflicted war within the banking system which, as I noted in an earlier FT column, is gradually transforming banks into "utilities". Second, the desire by governments to impose a peace by de-risking and re-regulating finance, lest today's crisis morphs again - and this time into a global depression that would negate the progress that the world has made in the last 10 years to improve living standards and alleviate poverty. These factors will inadvertently result in a considerable but uneven shrinkage of the investment management industry during 2009 and 2010. This unintended consequence will be felt most intensely in the levered (or "alternative") space dominated by hedge funds and private equity firms; but it will spread well beyond that to traditional investment managers, particularly in the equity space and among those that are part of declining banking conglomerates.