Asset managers are shrinking the U.S. fund set

The number of U.S. mutuals has been declining at the fastest pace in at least two decades, reflecting cost pressures and the strength of the investment industry and strong competition from exchange-traded funds.

The merger between asset managers in recent years has accelerated the process of closing and consolidating funds that do not attract enough cash from investors.

After reaching 9,616 in 2018, the number of significant U.S. fund funds has dropped to 9,000, the lowest level since 2013, according to data released by the Institute of Investment Companies this week.

“It’s not surprising to see markets liquidate or consolidate funds in times of volatile markets,” said Shelly Antoniewicz, ICI’s chief financial and industrial research director.

“Large fund operators are also under a lot of competitive pressure and cannot keep an open fund that does not gain the attention of investors.”

Last year, 644 mutual societies were closed or combined last year, the highest figure since 2009, according to ICI. Meanwhile, the number of mutual fund launches, 268, was the lowest since ICI began collecting data in the late 1990s.

Mutual funds have been a staple of the U.S. retail investment landscape for decades, but their popularity has eroded in part because of the rise of ETFs, which can be bought or sold as easily as stocks, and usually charge lower fees. Half of the mutual fund’s money comes from retirement accounts, such as the 401k plan and the IRA.

The number of new ETFs reached 313 in 2021, although reflecting their growing maturity, there were also 182 ETF settlements last year.

Collective investment trusts have also attracted attention, as 401 currently make up a quarter of the investment opportunities offered in the plans, up from only 6 percent in 2000, according to ICI. Collective investment trusts operate in a lighter regulatory regime than funds and can often be cheaper.

The downward trend in mutual funds has continued until 2021: this year, 64 have been settled and 53 have been merged, according to Morningstar.

Last month, T Rowe Price merged two high-capital funds in the U.S., and the asset manager said transfers of client investment funds to other portfolios, including trusts and separate accounts, they amounted to $ 5.6 billion in the first three months of the year.

Invesco is currently raising funds in 2018 after acquiring Oppenheimer funds.

“There’s still room for mutuals,” said Todd Rosenbluth, head of research at ETF and CFRA mutuals. “Some investors prefer the structure and remain the default option in retirement accounts until 401 thousand plans have ETFs.”