Volatile markets and investment rates have plagued the industry, and will continue to do so
Los Angeles, CA (PRWEB) December 25, 2012
The Open-End Investment Funds industry has been on a roller coaster ride in securities markets over the five years to 2012. From 2007 to 2012, US industry revenue is expected to decline at a 1.8% average annual rate, despite projected growth of 2.4% in 2012. Says IBISWorld industry analyst Doug Kelly, “The five-year growth rate masks the industry's volatile earnings, which fluctuated between several positive and negative swings.”
The industry is expected to reach $110.4 billion in revenue in 2012, a far cry from its historic high of $120.8 billion in 2007. Prior to the recession, strong securities markets boosted asset values and increased investment bolstered mutual fund and exchange-traded fund (ETF) assets even further. By 2008, however, “the collapse in US housing prices triggered large losses in the financial sector, which plunged the US economy into a recession,” says Kelly. Securities markets spiraled downward, causing open-end investment fund asset values to fall and industry revenue to decline 25.0% in 2008. The Open-End Investment Funds industry recovered slowly in 2009 and 2010 along with securities markets, but ETFs recovered more strongly than mutual funds.
IBISWorld estimates industry revenue will rise in 2012 as a result of mutual fund outflows and lower industry fees. Consumer preferences for ETFs grew consistently due to their ease of trade and low fees, but at the expense of mutual funds, which saw large capital outflows from money-market mutual funds. A major trend that continues to hurt the industry is declining fees. Over the five years to 2012, average fees in the industry have fallen slightly, largely due to pricing pressure that low-cost ETFs have put on mutual funds. This tactic is used to lower fees to compete for investor funds.
Concentration among portfolio managers who sponsor funds is much higher. There are more than 90 different mutual fund families. However, the largest 10 firms generate the majority of industry revenue while the remainder of the industry is composed of progressively smaller asset managers. The largest firms have a distinct advantage being able to recruit, pay and retain the best fund managers, making it difficult for smaller asset managers to gain a greater market share. Larger firms also have more revenue dollars to invest in marketing and advertising their products, performance and fees.
Over the five years to 2017, IBISWorld projects that investor demand for more customized investment products with diversified exposure to varying asset classes and investment timelines will drive innovation, boosting industry assets and revenue. IBISWorld estimates industry funds will increase each year on average over the next five years, bringing in new investor capital. Still, volatile securities markets combined with low interest rates will keep investment returns low for open-end investment funds, which will ultimately slow the industry's growth. For more information, visit IBISWorld’s Open-End Investment Funds industry in the US report page.
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IBISWorld industry Report Key Topics
This industry comprises legal entities (funds) that earn fees by pooling and investing money, giving the investors rights to a proportional share of the fund performance. Ownership shares of these funds are sold to the public in initial public offerings with additional shares offered continuously. Investors redeem the shares at prices determined by the fund’s net asset value or market value. This report focuses on mutual funds and exchange-traded funds.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.