Funds Become Bigger Force in Economy
BOSTON — GROWTH of the American mutual-fund industry has been so dramatic that it is giving the United States a different financial structure from that in other industrial countries.
That's what David Hale, an economist at Zurich Kemper Investments Inc. in Chicago, maintains. Here are some mutual-fund facts drawn from a report by Mr. Hale:
*The industry now has $1.3 trillion of equity-oriented funds, $811 billion of bond funds, and $753 billion of money-market funds. The total of roughly $3 trillion compares with $4.2 trillion of assets in all of America's 10,000 insured commercial banks.
*About 30.2 percent of US households own a mutual fund, up from 24 percent in 1990 and 6 percent in 1980; more than 87 percent of households have a bank account.
*Mutual-fund owners tend to be affluent. In 1994, 57 percent of households with annual incomes above $75,000 had mutual funds, compared to 40 percent for the $35,000-$50,000 income group, and 13 percent for those with incomes below $25,000.
*The ratio of mutual-fund assets to US national output is 38 percent. Abroad, the highest ratio is for France, at 35 percent, but 75 percent of those assets are in money-market funds and bond funds. (In the US, 45 percent of fund assets are in stocks.) Britain's ratio of fund assets to gross domestic product, the output of goods and services, is 14.4 percent, Canada's 14.5 percent.
*The top five fund management groups now account for 36 percent of industry assets, compared to 29 percent in 1984.
*Pension plans, such as Individual Retirement Accounts and 401(k)s accounted for $716 billion of the industry's $2.1 trillion in assets. These pension accounts are growing rapidly.
*As a result of the mutual-fund boom, the distribution of bond ownership has widened. In 1989, the wealthiest 1 percent of the US population owned 78 percent of all bonds; by 1992 41.6 percent. At the same time, the next wealthiest 9 percent expanded their ownership from 16.1 to 46.3 percent.
*Funds owned 7.1 percent of corporate equity in the US in 1990; 13.6 percent in 1994.
*The growth of mutual funds has caused an unprecedented outflow of capital from the US to foreign security markets. The assets of international stock funds (investing in foreign stocks only) and global stock funds (investing in US and foreign stocks) grew from $37 billion in 1992 to $212 billion recently.
To retain their share of household savings flows, banks have expanded their offerings of mutual funds. In 1994, 2,072 banks sold mutual funds and 46 percent of them were proprietary funds. In the early 1990s, banks primarily offered money-market funds. Now they are also promoting equity and bond funds.