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?It is not healthy for Google to have 99% of the Internet search pie. Monopolies are neither healthy nor economical. Perhaps this field should be regulated,? said Ilan Shiloah, CEO and chairman of McCann-Erickson advertising agency, speaking as a member of the ?Giants Change? panel at TheMarker Internet Conference last month.?

The Israeli capital market also has a ?changing giant,? by the name of Psagot Investment House. The problem is that Psagot is changing for the better, while the competition is changing for the worse. Another problem is that Psagot has no giant competitors. This investment house, which has a 21% share of the mutual funds market, was the fourth-largest company in this sector up until four years ago, with less than 15% of the market. Then Prisma Investment House, which bought and merged the two leading companies ?(Lahak and PKN?), managed to shrink them to a half, and the third company, PIA, was purchased by Harel and remained stable. The fifth company, Ilanot, was acquired by Clal and also lost ground.?

Other investment houses, such as Migdal, which tried to build large fund companies have been unable to make even a dent in Psagot?s dominance. Psagot is also the largest provident fund manager, following its acquisition of Gadish, and is Israel?s largest investment portfolio manager. Psagot recruits new investors at the same time as the other investment houses, but continues to sell products when the others are paying out to clients who are cashing in.?

Psagot established itself with a wise strategy, outstanding management and more than a little luck. The company?s investment management results are okay, but it is hard to find a special reason to invest specifically with Psagot. Its money market fund, for example, which has so far raised NIS 4 billion, is only in ninth place in the money market funds rankings. ?

So why do so many people choose Psagot? Investment advisors appear to be following a new-old trend of sending the public to the biggest and best-known fund, and Psagot is taking advantage of this. Prisma, whose management has been farcical for the past two years, is lowering the public?s faith in such funds in general, instead of affecting only Psagot.?

Shiloah, who used to be Psagot?s publicist, is right. Every industry dominated by a giant that just keeps growing will eventually suffer, even if the giant?s market share is far less than 99%. Psagot?s success is liable to reduce the competitiveness of this industry, and harm savers and investors. The capital market needs a new competitor who can wrestle with Psagot for control of the arena.