20160708-ICI-A_Review_of_Trends_and_Activities_in_the_U.S._Investment_Company_Industry_56th_edition_316页_5mb

2016 Investment Company Fact Book Summary

Core Content

The 56th edition of the 2016 Investment Company Fact Book provides an in-depth review of trends and activities in the U.S. investment company industry, including mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs). It highlights the industry's role in the U.S. and global financial markets, the structure of the industry, and the economic impact of investment companies.

Key Statistics

• Total worldwide assets invested in regulated open-end funds: $37.2 trillion

• U.S. investment company total net assets: $18.1 trillion

• Mutual funds: $15.7 trillion

• Exchange-traded funds (ETFs): $2.1 trillion

• Closed-end funds: $261 billion

• Unit investment trusts (UITs): $94 billion

• U.S. household ownership of funds:

  • Number of households owning funds: 54.9 million
  • Number of individuals owning funds: 93.1 million
  • Percentage of households owning funds: 44.1%
  • Median mutual fund assets of mutual fund-owning households: $120,000
  • Median number of mutual funds owned: 3

• U.S. retirement market:

  • Total retirement market assets: $24.0 trillion
  • Percentage of households with tax-advantaged retirement savings: 60%
  • IRA and DC plan assets invested in mutual funds: $7.1 trillion

• U.S. investment company industry employment: 174,000 employees

Main Points

Industry Overview

The U.S. investment company industry is a major player in the financial markets, with total net assets exceeding $18 trillion in 2015. This represents a slight decrease from $18.2 trillion in 2014, attributed to market volatility and currency fluctuations. The industry includes mutual funds, ETFs, closed-end funds, and UITs, with mutual funds and ETFs collectively holding $17.8 trillion in assets, representing the largest regulated open-end fund market globally.

Mutual Funds

• Mutual funds accounted for $15.7 trillion in assets, with a significant portion of these assets held by households.
• Equity funds held more than half of total mutual fund assets.
• Index mutual funds have grown in popularity, with funds indexed to the S&P 500 holding 31% of index fund assets.
• Net new cash flow to mutual funds was modest in 2015, with most inflows occurring in no-load institutional share classes.
• Mutual fund expenses have declined over the past 15 years, with lower-cost funds holding a larger share of assets.

Exchange-Traded Funds (ETFs)

• ETFs had $2.1 trillion in assets, with a growing presence in the U.S. and global markets.
• ETFs are a major source of liquidity for the high-yield bond market.
• ETF-owning households are more willing to take investment risk and hold a broad range of investments.

Closed-End Funds

• Closed-end funds held $261 billion in assets at year-end 2015.
• They have increasingly used portfolio leverage, with preferred shares being the main form of structural leverage.
• Closed-end fund investors tend to have higher household incomes and financial assets compared to the general population.

Unit Investment Trusts (UITs)

• UITs held $94 billion in assets, with a focus on fixed-income securities.
• The industry has seen a shift in asset allocation, with more assets moving into lower-cost funds.

Retirement and Education Savings

• Retirement market assets totaled $24.0 trillion, with 60% of households using tax-advantaged retirement savings.
• IRA and DC plan assets invested in mutual funds reached $7.1 trillion.
• Target date and lifestyle funds have become a larger share of mutual fund assets in retirement accounts.
• Roth IRA investors rarely take withdrawals, while traditional IRA investors are significantly affected by required minimum distributions (RMDs).

Industry Employment

• The investment company industry employed 174,000 people in 2015.
• Employment is distributed across various functions, including investment management, administration, and compliance.
• Employment is concentrated in certain states, reflecting the geographic distribution of the industry.

Key Insights

• The U.S. retirement system is progressive, with benefits increasing proportionally for workers with lower lifetime earnings.
• Derivatives used by funds do not necessarily indicate higher risk, as they can be used for hedging, liquidity management, and other purposes.
• The use of no-load share classes has increased, reducing costs for investors.
• 401(k) plans are a significant source of first mutual fund purchases, especially for younger generations.
• Investor behavior is influenced by age, income, and retirement planning, with a notable shift in asset allocation preferences.

Conclusion

The 2016 Investment Company Fact Book underscores the complexity of the investment company industry and its significant role in both U.S. and global financial markets. It highlights the importance of evidence-based analysis in understanding the economic and policy implications of these financial instruments, especially in the context of retirement savings and investment behavior. The report also emphasizes the need for nuanced discussions in shaping public policy that affects investors and the broader financial system.