January 2, 2018 • Karen DeMasters
The popularity of mutual funds, which saw dramatic increases over the years as defined contribution retirement plans gained a foothold in the financial industry, is holding up this year, according to the Investment Company Institute, the national trade association for investment companies. Mutual funds have maintained investment dollars with just a little “jiggling” up and down in inflows from month to month, says Sarah Holden, ICI’s senior director of retirement and investor research. More than three times as many U.S. households owned mutual funds through tax-deferred accounts, such as employer-sponsored retirement plans and individual retirement accounts, than those who owned mutual funds outside such accounts. The holdings for all types of mutual funds, including equities, bonds, money markets and hybrids, were at $370 billion in 1984 when defined benefit retirement plans began to be phased out. Holdings grew rapidly as more employers switched to defined contribution plans, including 401(k)s, until they broke the $1 trillion mark in 1990, ICI says. The steady climb in assets, which reached $12 trillion in 2007, was put on hold by the Great Recession, which dropped holdings to $9.6 trillion the next year. That climb has now resumed, although it leveled off in the $11 trillion area for several years. This year may be a record-breaker, with more than $18 trillion held in all types of mutual funds by year’s end. Within the mutual fund channel, a shift is now being made to bond funds as the population ages and baby boomers reach retirement and desire more conservative investing options, says Shelly Antoniewicz, a senior economist with ICI. New entrants into the retirement savings market are still heavily invested in equities because of their young age, she adds.
The popularity of mutual funds, which saw dramatic increases over the years as defined contribution retirement plans gained a foothold in the financial industry, is holding up this year, according to the Investment Company Institute, the national trade association for investment companies.
Mutual funds have maintained investment dollars with just a little “jiggling” up and down in inflows from month to month, says Sarah Holden, ICI’s senior director of retirement and investor research.
More than three times as many U.S. households owned mutual funds through tax-deferred accounts, such as employer-sponsored retirement plans and individual retirement accounts, than those who owned mutual funds outside such accounts.
The holdings for all types of mutual funds, including equities, bonds, money markets and hybrids, were at $370 billion in 1984 when defined benefit retirement plans began to be phased out. Holdings grew rapidly as more employers switched to defined contribution plans, including 401(k)s, until they broke the $1 trillion mark in 1990, ICI says.
The steady climb in assets, which reached $12 trillion in 2007, was put on hold by the Great Recession, which dropped holdings to $9.6 trillion the next year. That climb has now resumed, although it leveled off in the $11 trillion area for several years.
This year may be a record-breaker, with more than $18 trillion held in all types of mutual funds by year’s end.
Within the mutual fund channel, a shift is now being made to bond funds as the population ages and baby boomers reach retirement and desire more conservative investing options, says Shelly Antoniewicz, a senior economist with ICI. New entrants into the retirement savings market are still heavily invested in equities because of their young age, she adds.
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