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A Letter From ICI’s Chief
Economist

2005 Facts at a Glance

ICI Research: Staff and
Publications

SECTION ONE:
Overview of U.S.-Registered
Investment Companies

SECTION TWO:
Recent Mutual Fund
Trends

SECTION THREE:
Exchange-Traded Funds

SECTION FOUR:
Closed-End Funds

SECTION FIVE:
Mutual Fund Fees and
Expenses

SECTION SIX:
Mutual Fund Owners:
Who Are They and
Where Do They
Purchase Fund Shares?

SECTION SEVEN:
The Role of Mutual Funds
in Retirement and
Education Savings

DATA TABLES

APPENDIX A:
How Mutual Funds and
Investment Companies
Operate

APPENDIX B:
ICI Statistical Releases
and Research

GLOSSARY OF TERMS

FACT BOOK ARCHIVE

U.S.-registered investment companies play a significant role in the U.S. economy and world financial markets, managing the assets of millions of U.S. investors, supplying investment capital in securities markets around the world, and employing thousands of U.S. workers.

Sources of Investment Company Growth in 2005

Registered investment companies managed a record $9.5 trillion at year-end 2005, about a $900 billion increase from 2004. Mutual funds, managing nearly 94 percent of total investment company assets, held $8.9 trillion. By year-end 2005, closed-end fund assets totaled $276 billion; exchange-traded funds (ETFs), $296 billion; and unit investment trusts (UITs), $41 billion.

Investment performance fueled much of the growth in investment company assets during 2005. Broad U.S. stock return indexes rose about 6 percent, leading to positive investment performance for funds investing in U.S. stocks. Rising stock prices abroad also boosted the returns on funds investing in foreign stocks, with broad foreign stock indexes rising 10 to 35 percent.

Shareholders added $192 billion of net new cash to their stock, bond, and hybrid mutual funds. Money market mutual funds experienced a net inflow of $63 billion—the first positive annual net flow since 2001— as rising short-term U.S. interest rates increased investor demand for these funds.

Net issuance of ETF shares, which includes reinvested dividends, totaled $54 billion in 2005. Excluding share buybacks, closed-end funds issued $21 billion in new shares during 2005, and UITs had gross issuance of $23 billion, which also excludes any liquidation of UITs.

For more statistics on investment companies, see the Data Tables in this book.

Number of Investment Companies and Types of Intermediaries

Historically, low barriers to entry have attracted a large number of investment company sponsors to the fund marketplace in the United States, and active competition among these sponsors has helped to keep asset concentration low for many years.

As of year-end 2005, there were 15,308 investment companies: 8,454 mutual funds (including funds that invest in other funds), 6,019 unit investment trusts, 634 closed-end funds, and 201 exchange-traded funds. The total number of investment companies has fallen considerably since 2001, in large part due to the decline in the number of UITs, as sponsors of UITs have been creating fewer new trusts. Because these investment companies often have preset termination dates, the slower pace of creation has caused the number of UITs to decline substantially.

Investment Company Assets

(billions of dollars, 1995–2005)

Download an Excel file of this data.

¹Mutual fund data exclude mutual funds that primarily invest in other mutual funds.
²ETF data prior to 2001 were provided by Strategic Insight Simfund.
³Total investment company assets include mutual fund holdings of closed-end funds and ETFs.
Sources: Investment Company Institute and Strategic Insight Simfund

In addition, the number of mutual funds has fallen somewhat since 2001. Dynamics in the fund marketplace affect the number of funds offered in any given year, leading fund sponsors to create new funds to meet investor demand, and merge or liquidate funds that do not attract sufficient investor interest. In 2005, mutual fund sponsors opened about 525 new funds and liquidated and merged about an equal number of funds, leaving little net increase for the year. At the same time, sponsors of ETFs and closed-end funds, on net, created 65 new funds in 2005.

Number of Investment Companies

(number of each type of investment company, 1995–2005)

Download an Excel file of this data.

¹Mutual fund data include mutual funds that invest primarily in other mutual funds.
²ETF data prior to 2001 were provided by Strategic Insight Simfund.
Sources: Investment Company Institute and Strategic Insight Simfund

More than 500 financial intermediaries from around the world compete in the U.S. market to provide investment management services to investors. Nearly 60 percent of U.S. fund and trust sponsors are independent investment advisers, and these sponsors manage about half of investment company assets. Banks, insurance companies, securities broker-dealers, and non-U.S. sponsors are other major fund and trust sponsors in the U.S. marketplace.

More statistics on exchange-traded funds, closed-end funds, and unit investment trusts are available in this book and in the Statistics and Research section of this website.

Role of U.S. Investment Companies in Financial Markets

U.S. investment companies channel American household and business investment into stock, bond, and money markets around the world.

Investment companies hold 25 percent of the outstanding stock of U.S. companies. They play an even larger role in the U.S. municipal debt markets that provide capital to state and local governments, holding 32 percent of all outstanding tax-exempt debt. As a group, investment companies are the second largest holder of tax-exempt debt in the United States, second to direct household ownership.

Nearly 60 Percent of Fund Sponsors Are Independent Investment Advisers

(percent of investment company complexes by type of intermediary, December 2005)

Download an Excel file of this data.

Investment companies also play a significant role in the taxable debt markets. Investment companies, and mutual funds in particular, are the largest investor in the U.S. commercial paper market, an important source of short-term funding for major U.S. corporations, and investment companies as a group hold about 10 percent of corporate bonds and U.S. Treasury and agency debt.

Investment Companies Channel Investment to Stock, Bond, and Money Markets

(percent of total market securities held by investment companies, 2005)

Download an Excel file of this data.

Note: Components may not add to the total because of rounding.
Sources: Investment Company Institute, Federal Reserve Board, and World Federation of Exchanges

Investment Company Employment

A 2005 ICI survey finds that the entities providing services to registered investment companies employed 146,250 people nationwide. Employment is grouped into
five major categories: (1) investor servicing, (2) fund management, (3) fund administration, (4) sales, and (5) distribution.

About one-third of fund industry jobs are concentrated in investor account servicing, including retirement plan recordkeeping. An additional third of jobs support functions related to fund management, such as portfolio management, investment research, trading and security settlement, information systems and technology, and other corporate management functions. Jobs related to fund administration, including financial and portfolio accounting and regulatory compliance duties, account for another 14 percent of total fund industry jobs. Personnel involved with distribution services, such as marketing, product development and design, and investor communications, account for 9 percent of the employees. Sales force employees, including registered representatives and sales support staff where at least 50 percent of the employee’s revenue is derived from mutual fund sales, and mutual fund supermarket representatives, represent 14 percent of fund industry jobs.

Investment Company Industry Employment by Job Function

(percent of jobs in registered investment company operations areas, 2005)

Download an Excel file of this data.

As in many other industries, investment company employment tends to be concentrated in certain regions of the country. Several states along the Eastern seaboard—Massachusetts, New York, New Jersey, Pennsylvania, Maryland, North Carolina, and Florida—serve as major centers of fund industry employment, while other areas of concentration around the United States include California, Colorado, Minnesota, Missouri, and Texas.

Industry Employment by State

(estimated number of employees of registered investment companies by state, 2005)