Mutual Fund Management Industry Profile

The US mutual fund management industry includes about 600 companies with about $10 trillion in assets under management. Major companies include BlackRock, Capital Research and Management (American Funds), FMR (Fidelity Investments), JPMorgan Chase, and Vanguard.

COMPETITIVE LANDSCAPE

Demand is affected by the growth of retirement capital and returns on alternative investments. The profitability of individual companies depends on investment expertise and effective marketing. Large companies have economies of scale in operations and marketing; small companies can compete effectively by producing higher investment returns.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major services include the initial formation of a mutual fund, sales and redemption of shares, investment advisory services, and day-to-day management.

Each mutual fund is a separate open-end investment company, with shareholders (the investors) and a board of directors, but no operating staff. The sponsor of a fund usually serves as investment adviser and manager of the fund, and receives an annual fee typically calculated as a percentage of fund's assets. Large mutual fund operators may sponsor and manage dozens of funds, collecting a management fee from each. In addition to paying a management fee, mutual funds pay the underwriters who sell their shares, the custodian of their portfolio, the transfer agent, and an independent auditor. The expense ratio for a fund is the sum of all annual expenses divided by the average net assets of the fund. The average industry expense ratio is about 1 percent.

A mutual fund typically specializes in ...