There has been considerable growth in recent years in the mutual fund industry. The number of mutual funds worldwide grew from 6,778 in 1997 to 9,599 in 2018. According to the Investment Company Institute (ICI), more than 101.6 million U.S. investors had $21.4 trillion in assets (including those of exchange-traded funds, closed-end funds, and unit investment trusts) invested in mutual funds in 2018. Although there have been occasional downturns in total net assets due to economic recessions (such as the Great Recession, which lasted from December 2007 to June 2009), corporate scandals, or other factors, the industry has always bounced back. In 2007, total assets under management (AUM) in the U.S. mutual fund industry reached a record $12 trillion, but in 2008, at the height of the Great Recession, total AUM declined to $9.6 trillion. As the recession lessened, AUM rebounded. Between 2009 and 2017, total net assets of worldwide regulated open-end funds grew by about 46 percent.
The ICI reports that “worldwide regulated funds have seen robust growth in total net assets in the past decade across the United States, Europe, Asia-Pacific, and the rest of the world. Among other factors, rising demand for regulated funds has been driven by investors’ demand for professionally managed and well-diversified products offering access to capital markets and by the increasing depth and liquidity of global capital markets.”
This strong growth was disrupted in 2020, however, by the coronavirus pandemic, which began in Wuhan, China, in late 2019. Business lockdowns and work and travel restrictions contributed to an economic slowdown. The open-end investment funds industry in the U.S. declined as "cash-strapped investors withdrew capital from investments amid high economic uncertainty," according to the research group IBISWorld. An increase in mutual fund flow is expected from 2026, as the COVID-19 vaccine was rolled out in 2021 and the economy rebounds. Growth in this industry in the coming years will be due to projected increases in corporate profit and rising prices in financial markets.
Moving forward, the industry will face a variety of challenges. Some of the major trends and potential roadblocks that will affect the mutual fund industry include:
- A strong shift by investors from investment in actively managed mutual funds to passively managed funds. In 2019, passively managed funds comprised approximately 39 percent of mutual fund/exchange traded fund assets under management (AUM), as compared to 36 percent of AUM in 2018, 23 percent of AUM in September 2015, and 9 percent of AUM in December 2005, according to Mutual Fund Outlook from PricewaterhouseCoopers. PwC also notes that the market has been shifting into passive funds. It estimates that passively managed funds could comprise 55 percent of AUM by 2025, which could create declining profits. Mutual fund companies are reducing management and other fees in order to compete for business. Industry giant Fidelity is even offering no-fee funds, but that strategy is not an effective approach for smaller companies that are fighting for market share. PricewaterhouseCoopers foresees slow growth in this industry in the coming years, with assets under management growing at an annual rate of just over 3 percent from 2019 through 2025.
- A massive movement of wealth from older generations to Generations X and Y investors. Portfolio managers will need to understand these younger groups’ investment goals (passive vs. active) and communication preferences (such as using social media and having videoconferences with their investment advisers).
- The growing use of data and predictive analytics software by portfolio managers and mutual fund executives to make investment and operational decisions, better understand the needs of existing clients and market to new ones, and identify high-producing geographies and territories and locate new target markets, among many other uses.
- The development of algorithm-driven financial portfolio management software that allows customers to invest with minimal human interaction. Robo advisor firms such as Wealthfront and Betterment have emerged to provide robo advisory investment services. In 2017, robo advisors collectively managed about $200 billion in assets, according to the Pension Research Council. Deloitte predicts that global AUM of RAs will increase to $16 trillion by 2025. Some traditional investment management firms such as Fidelity and Charles Schwab have embraced the use of robo advisory software to complement their traditional offerings.
- The introduction of new or lesser-known investments such as business development companies, catastrophe bonds, and master limited partnerships, as well as exchange-traded products, guaranteed retirement income products, and retail alternatives, as a strategy to gain market share in an increasingly competitive market.
The DOL reports that employment for many occupations in the securities, commodities, and other investments industry is expected to increase from 2018 to 2028.
Job opportunities for accountants and auditors in the mutual fund industry and related investment sectors are expected to increase by 32 percent. The DOL says that “globalization, a growing economy, and a complex tax and regulatory environment are expected to continue to lead to strong demand for accountants and auditors.”
Employment for financial analysts (including analysts, fund managers, and portfolio managers) is expected to grow by 21.9 percent. The DOL reports that “a growing range of financial products and the need for in-depth knowledge of geographic regions are expected to lead to strong employment growth.” Financial analysts with a graduate degree in finance and certification will have the best job prospects.
Employment for marketing managers is expected to grow by 5 percent. Increasing competition for investment dollars will create demand for marketing professionals who can create campaigns that attract new customers—especially those from younger generations.
Career opportunities for financial managers (including chief financial officers, controllers, treasurers and finance officers, risk managers) will increase by 39.3 percent. The DOL says that “services provided by financial managers, such as planning, directing, and coordinating investments, are likely to stay in demand as the economy grows. Candidates with expertise in accounting and finance—particularly those with a master's degree or certification—should enjoy the best job prospects.”
Employment for computer and information systems managers is expected to grow by 5.1 percent as a result of the increasing use of information technology in the middle and back offices of mutual fund companies, as well as in trading. Concerns about cybersecurity will create demand for information security analysts. Employment for these professionals will grow by nearly 21 percent.
Job opportunities for financial planners are expected to increase by 30.2 percent. The replacement of traditional pension plans with individual retirement accounts has prompted more people to invest in mutual funds and other types of funds. Financial planners who are certified will have the best job prospects.
Competition for executive-level positions is extremely strong in the mutual fund industry. The DOL says that chief executives “with an advanced degree and extensive managerial experience will have the best job prospects.”
Recent industry surveys have identified a growing labor problem—the ability to recruit and retain employees with the skills needed to succeed. Fifty-five percent of asset management CEOs surveyed by Pricewaterhousecoopers reported that it has become more difficult to hire qualified workers. “In a seller’s market for talent, potential employees are dictating where they want to work, and many are looking for employers that align with their values and priorities, such as work-life balance and diversity and inclusion in the workplace,” says Pricewaterhousecoopers. “Firms are adopting a variety of strategies to bolster the workforce, such as upskilling employees and hiring from competitors.”
Salaries remain strong in the mutual fund industry. In 2019, portfolio managers earned salaries that ranged from $99,750 to $189,750, according to Robert Half’s 2020 Salary Guide: Accounting and Finance. Earning vary by job title. For example, at Edward Jones, senior programmer analysts earned average base pay of $85,494, according to online salary surveys, while branch office administrators earned $37,651.