2011 Investment Company Fact Book

51st EDITION

A Review of Trends and Activity in the Investment Company Industry

WWW.ICIFACTBOOK.ORG
2010 Facts at a Glance

Total worldwide assets invested in mutual funds $24.7 trillion

U.S. investment company total net assets $13.1 trillion

Mutual funds $11.8 trillion
Exchange-traded funds $992 billion
Closed-end funds $241 billion
Unit investment trusts $51 billion

U.S. investment companies’ share of:

U.S. stocks 27%
U.S. municipal securities 33%
Commercial paper 45%
U.S. government securities 11%

U.S. household ownership of mutual funds

Number of households owning mutual funds 51.6 million
Number of individuals owning mutual funds 90.2 million
Percentage of households owning mutual funds 44%
Median amount fund-owning households invested in mutual funds $100,000
Median number of mutual funds owned 4

U.S. retirement market

Total retirement market assets $17.5 trillion
Percentage of households with tax-advantaged retirement savings 70%
IRA and DC plan assets invested in mutual funds $4.7 trillion
2011 Investment Company Fact Book
2011 Investment Company Fact Book

51st EDITION

A Review of Trends and Activity in the Investment Company Industry

WWW.ICIFACTBOOK.ORG
The Investment Company Institute (ICI) is the national association of U.S. investment companies. ICI seeks to encourage adherence
to high ethical standards, promote public understanding, and otherwise advance the interests of funds, their shareholders, directors,
and advisers.
Although information or data provided by independent sources are believed to be reliable, ICI is not responsible for its accuracy,
completeness, or timeliness. Opinions expressed by independent sources are not necessarily those of the Institute. If you have
questions or comments about this material, please contact the source directly.
Fifty-first edition
ISBN 978-1-878731-50-5
Copyright © 2011 by the Investment Company Institute
Contents

Letter from the Chief Economist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

ICI Research: Staff and Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Part 1: Analysis and Statistics

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Chapter 1: Overview of U.S.-Registered Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 2: Recent Mutual Fund Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Chapter 3: Exchange-Traded Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Chapter 4: Closed-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Chapter 5: Mutual Fund Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Chapter 6: Characteristics of Mutual Fund Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Chapter 7: Retirement and Education Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Part 2: Data Tables

List of Data Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Section 1: U.S. Mutual Fund Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Section 2: Closed-End Funds, Exchange-Traded Funds, and Unit Investment Trusts . . . . . . . . . . . . . . . . 138
Section 3: U.S. Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Section 4: U.S. Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Section 5: Additional Categories of U.S. Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Section 6: Institutional Investors in the U.S. Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Section 7: Worldwide Mutual Fund Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Appendix A: How U.S.-Registered Investment Companies Operate and the Core Principles
Underlying Their Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Appendix B: Significant Events in Fund History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Letter from the Chief Economist

Brian Reid
Chief Economist of the Investment Company Institute

One of the aspects of my job that I enjoy the most is visiting our member firms
to update them on issues in Washington or trends among funds and investors.
While the purpose of my visits is for me to inform members, in truth, these
presentations serve more to launch conversations in which I learn from them
about the asset management business. These conversations provide color and
context for the data that we gather, and they highlight new developments
among funds and their shareholders.
Each year, the annual update of the Fact Book gives us an opportunity to present a broad overview
of the investment landscape by recording in a single volume some of the insights from these
meetings and from our own research. Sometimes the developments are slow, and the picture
barely changes from one year to the next. In other years, there are large shifts that permanently
affect the investment management business.

To capture these trends, Senior Economist Rochelle Antoniewicz and Senior Director of Statistical
Research Judy Steenstra, who lead ICI Research’s efforts to update the Fact Book, decide early
each winter what modifications need to be made to the volume’s seven chapters and nearly 170
charts and tables. Often, changes from one year to the next, like those in the fund business, are
incremental: we expand on an existing topic, add a new chart or table, or even remove material
that has become less relevant. Sometimes, sweeping revisions are needed, and we reorganize one
or more chapters. With each rewrite, the chapter’s author has an opportunity to restructure the
material to reflect how funds and investing behavior have changed over time.

This year, Senior Economist Peter Brady rewrote Chapter 7, which examines the role that mutual
funds play in the retirement and education savings markets. For example, you will see an expanded
discussion of target date funds, which have become a popular investment within 401(k) and other
defined contribution plans.

Peter also has done extensive research on how people prepare for retirement, and he discusses
some of this work in the restructured chapter. I find it notable that many of the Baby Boomers
who are in or nearing retirement will draw income from many of the same sources on which their
parents relied. Social Security, for example, continues to play a key role in providing income
security for many retired Americans because it replaces a large share of annual labor income for
many low- to moderate-income families. At the same time, the creation of IRAs in the 1970s and
the expansion of 401(k)s and other defined contribution plans in the past two decades have given
these workers new ways to save for retirement.

Exchange-traded funds provide another example of how changes in the fund industry drive ICI
Research and the composition of the Fact Book. The development of this investment product
has been quite rapid. In the past decade, ETF assets have grown from $66 billion to $992 billion,
making them the second most common type of registered investment company. Three years ago
we included ETFs in a chapter that focused on indexing and index funds, with an emphasis on
equity funds. In 2009, we dedicated a separate chapter to ETFs, reflecting both their rapid asset
growth and their increasing diversity as they expand to include actively managed funds and funds
investing in commodities, fixed-income securities, and a variety of other forms.

viii LETTER FROM THE CHIEF ECONOMIST

In other ways, investing trends have come full circle. While researchers and journalists tend to
focus on domestic stock mutual funds, today the assets of fixed-income funds—money market and
bond funds—nearly equal those of stock funds. Table 3 in the data section tells us this is not the
first time that this has occurred. Stock funds dominated fund investing following the passage of
the Investment Company Act of 1940. But successive bear markets in stocks in the 1970s along with
rising interest rates drew investors into a growing number of bond and money market funds. By
1979, these funds managed more assets than stock funds, and they remained the dominant form
of fund investing as recently as 1995.

As I read this year’s Fact Book one last time before it goes to the printer, I am reminded how
much both funds and their investors have changed over time. The Fact Book also has evolved, by
reflecting our current research and analysis. What has not changed is our mission. ICI Research
seeks to bring together the highest quality data and scholarship about investment companies,
fund shareholders, and retirement markets; to serve as a resource for ICI members, educators,
government officials, journalists, and the general public; and to facilitate sound, well-informed
public policies affecting investment companies, their investors, and the retirement markets.

This mission is central to the work of every member of the ICI Research Department. Each spring
we dedicate months of effort, bringing together our talents and deep knowledge of funds and their
investors, to publish the latest edition of the Fact Book. Thank you for your continued interest and
feedback on our research and publications.

LETTER FROM THE CHIEF ECONOMIST ix

ICI Research
Staff and Publications

ICI Senior Research Staff

Chief Economist
Brian Reid leads the Institute’s Research Department. The department serves as a
source for statistical data on the investment company industry and conducts public
policy research on fund industry trends, shareholder demographics, the industry’s role
in U.S. and foreign financial markets, and the retirement market. Prior to joining ICI in
1996, Reid served as an economist at the Federal Reserve Board of Governors. He has
a PhD in economics from the University of Michigan and a BS in economics from the
University of Wisconsin–Madison.

Industry and Financial Analysis

Sean Collins, Senior Director of Industry and Financial Analysis, heads ICI’s research on
the structure of the mutual fund industry, industry trends, and the broader financial
markets. Collins, who joined ICI in 2000, is responsible for conducting and overseeing
research on the flows, assets, and fees of mutual funds, as well as a major research
initiative to better understand the costs and benefits of laws and regulations governing
mutual funds. Prior to joining ICI, Collins was a staff economist at the Federal Reserve
Board of Governors and at the Reserve Bank of New Zealand. He has a PhD in
economics from the University of California, Santa Barbara, and a BA in economics
from Claremont McKenna College.

Retirement and Investor Research

Sarah Holden, Senior Director of Retirement and Investor Research, leads the Institute’s
research efforts on investor demographics and behavior, retirement and tax policy,
and international issues. Holden, who joined ICI in 1999, heads efforts to track trends
in household retirement saving activity and ownership of funds and other investments
inside and outside retirement accounts. Prior to joining ICI, Holden served as an
economist at the Federal Reserve Board of Governors. She has a PhD in economics
from the University of Michigan and a BA in mathematics and economics from Smith
College.

Statistical Research
Judy Steenstra, Senior Director of Statistical Research, oversees the collection and
publication of weekly, monthly, quarterly, and annual data on open-end mutual
funds, as well as data on closed-end funds, exchange-traded funds, unit investment
trusts, and the worldwide mutual fund industry. Steenstra joined ICI in 1987 and was
appointed Director of Statistical Research in 2000. She has a BS in marketing from The
Pennsylvania State University.

STAFF AND PUBLICATIONS xi

ICI Research Department Staff
The ICI Research Department consists of 41 staff members, including economists, research
assistants, policy analysts, and data assistants. This staff collected and disseminated data for
all types of registered investment companies, offering detailed analyses of fund shareholders,
the economics of investment companies, and the retirement and education savings markets.

2010 Research Publications and Statistical Releases

ICI is the primary source of analysis and statistical information on the investment company industry.
In 2010, the Institute’s Research Department released almost 150 statistical reports examining
the broader investment company industry as well as specific segments of the industry: money
market funds, closed-end funds, exchange-traded funds, and unit investment trusts. In addition
to the annual Investment Company Fact Book, ICI published 20 research and policy reports in
2010, examining the industry, its shareholders, and industry issues. ICI also regularly compiles and
releases specialized statistical reports that measure mutual funds in the retirement, institutional,
and worldwide markets.

Industry and Financial Analysis Research Publications

»» “Trends in the Fees and Expenses of Mutual Funds, 2009,” Fundamentals, April 2010
»» “Trends in Proxy Voting by Registered Investment Companies, 2007–2009,” Perspective,
November 2010

Investor Research Publications

»» Enduring Confidence in the 401(k) System: Investor Attitudes and Actions, January 2010
»» Profile of Mutual Fund Shareholders, 2009, February 2010
»» “The Closed-End Fund Market, 2009,” Fundamentals, June 2010
»» The IRA Investor Profile: Traditional IRA Investors’ Contribution Activity, 2007 and 2008,
June 2010
»» “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010,”
Fundamentals, September 2010
»» “Characteristics of Mutual Fund Investors, 2010,” Fundamentals, September 2010
»» The IRA Investor Profile: Traditional IRA Investors’ Rollover Activity, 2007 and 2008,
December 2010

xii STAFF AND PUBLICATIONS

Retirement Research Publications
»» “The U.S. Retirement Market, Third Quarter 2009,” Fundamentals, January 2010
»» “The Role of IRAs in U.S. Households’ Saving for Retirement, 2009,” Fundamentals,
January 2010
»» “The U.S. Retirement Market, 2009,” Fundamentals, May 2010
»» “The U.S. Retirement Market, First Quarter 2010,” Fundamentals, August 2010
»» Defined Contribution Plan Participants’ Activities: First Quarter 2010, August 2010
»» “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2009,”
Fundamentals, September 2010
»» “The U.S. Retirement Market, Second Quarter 2010,” Fundamentals, October 2010
»» Defined Contribution Plan Participants’ Activities: First Half 2010, October 2010
»» “A Look at Retirement Income After ERISA,” Perspective, November 2010
»» “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2009,” Perspective,
November 2010
»» “The Role of IRAs in U.S. Households’ Saving for Retirement, 2010,” Fundamentals,
December 2010

Statistical Releases
Trends in Mutual Fund Investing
A monthly report that includes mutual fund sales, redemptions, assets, cash positions, exchange
activity, and portfolio transactions for the period.

Long-Term Mutual Fund Flows

A weekly report on aggregate estimates of net new cash flows to equity, hybrid, and bond funds.

Money Market Fund Assets

A weekly report on money market fund assets by type of fund.

Mutual Fund Assets in Retirement Accounts

A quarterly report that includes individual retirement account and defined contribution plan assets
and estimates of net new cash flows to mutual funds from retirement accounts.

STAFF AND PUBLICATIONS xiii

Closed-End Fund Statistics
A quarterly report on closed-end fund assets, number of funds, issuance, and number of
shareholders.

Exchange-Traded Funds
A monthly report on ETF assets, number of funds, issuance, and redemptions of ETFs.

Unit Investment Trusts

A monthly report on UIT value and number of deposits of new trusts by type and maturity.

Worldwide Mutual Fund Market

A quarterly report that includes assets, number of funds, and net sales of mutual funds in countries
worldwide.

To find ICI research, visit our website at www.ici.org/research. The most recent ICI statistics and an
archive of statistical releases are available at www.ici.org/research#statistics. To subscribe to ICI’s
statistical releases, visit www.ici.org/pdf/stats_subs_order.pdf.

Acknowledgments
Publication of the 2011 Investment Company Fact Book was directed by Rochelle Antoniewicz,
Senior Economist, and Judy Steenstra, Senior Director of Statistical Research, working with Miriam
Moore, Senior Editor, and Jodi Weakland, Design Director.

xiv STAFF AND PUBLICATIONS

Part One

Analysis and Statistics

Figures

Chapter 1
Overview of U.S.-Registered Investment Companies
Figure 1.1: Investment Company Total Net Assets by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.2: Share of Household Financial Assets Held in Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3: Household Net Investments in Funds, Bonds, and Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4: Mutual Funds in Household Retirement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5: Investment Companies Channel Investment to Stock, Bond, and Money Markets . . . . . . . . . . . . . . . . . . . . 12
1.6: Nearly Three-Quarters of Fund Complexes Were Independent Fund Advisers . . . . . . . . . . . . . . . . . . . . . . . 13
1.7: Number of Fund Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.8: Fund Complexes with Positive Net New Cash Flow to Stock, Bond, and Hybrid Funds . . . . . . . . . . . . . . . . 15
1.9: Number of Mutual Funds Leaving and Entering the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.10: Number of Investment Companies by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.11: Investment Company Industry Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.12: Investment Company Industry Employment by Job Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.13: Investment Company Industry Employment by State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 2
Recent Mutual Fund Trends
Figure 2.1: The U.S. Had the World’s Largest Mutual Fund Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2: Share of Assets at the Largest Mutual Fund Complexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3: Net Flows to Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.4: Net Flows to Equity Funds Related to Global Stock Price Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.5: Willingness to Take Above-Average or Substantial Investment Risk by Age . . . . . . . . . . . . . . . . . . . . . . . . 27
2.6: Turnover Rate Experienced by Equity Fund Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.7: Net Flows to Bond Funds Related to Bond Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.8: Total Net Assets and Net Flows to Funds of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.9: Net Flows to Index Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.10: 37 Percent of Index Fund Assets Were Invested in S&P 500 Index Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.11: Equity Index Funds’ Share Continued to Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.12: Net Flows to Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.13: Net Flows to Taxable Retail Money Market Funds Related to Interest Rate Spread . . . . . . . . . . . . . . . . . . 35
2.14: Total Net Assets and Net Flows to Taxable U.S. Government and Non-Government
Institutional Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.15: Money Market Funds Managed 25 Percent of U.S. Businesses’ Short-Term Assets in 2010 . . . . . . . . . . . 37

FIGURES 3
Chapter 3
Exchange-Traded Funds
Figure 3.1: Total Net Assets and Number of ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.2: Legal Structure of ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.3: Creation of an ETF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.4: Net Issuance of ETF Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.5: Net Issuance of ETF Shares by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.6: Total Net Assets of ETFs Concentrated in Large-Cap Domestic Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.7: Number of ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.8: Number of Commodity and Sector ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.9: Total Net Assets of Commodity and Sector ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.10: ETF-Owning Households Held a Broad Range of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.11: Characteristics of ETF-Owning Households . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Chapter 4
Closed-End Funds
Figure 4.1: Closed-End Fund Total Net Assets Increased to $241 Billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.2: Bond Funds Were the Largest Segment of the Closed-End Fund Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.3: Closed-End Fund Share Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.4: Number of Closed-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.5: Bulk of Closed-End Fund Total Net Assets Was in Common Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.6: Closed-End Fund AMPS Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.7: Closed-End Fund–Owning Households Held a Broad Range of Investments . . . . . . . . . . . . . . . . . . . . . . . . 60
4.8: Closed-End Fund–Owning Households Had Above-Average Household Incomes and
Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Chapter 5
Mutual Fund Fees and Expenses
Figure 5.1: Fees and Expenses Incurred by Stock and Bond Mutual Fund Investors Have Declined
by More Than Half Since 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.2: Front-End Sales Loads That Investors Paid Were Well Below Maximum Front-End Sales
Loads That Funds Charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.3: Fund Shareholders Paid Lower-Than-Average Expenses in Stock Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.4: Least Costly Stock Funds Attract Most of the Net New Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.5: Expense Ratios for Selected Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.6: Fund Sizes and Average Account Balances Varied Widely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.7: Investor Assets Were Concentrated in S&P 500 Index Mutual Funds with the Lowest Expense Ratios . . . 70
5.8: Investors’ Net Purchases of S&P 500 Index Mutual Funds Were Concentrated in Least Costly Funds . . . . 71
5.9: Fund Expense Ratios Tend to Fall as Fund Total Net Assets Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.10: Most 12b-1 Fees Used to Pay for Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.11: 12b-1 Fees Paid Reflect Asset Growth and Shift in Source of Financial Advisers’ Compensation . . . . . . 75
5.12: Net New Cash Flow Was Greatest in No-Load Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.13: Total Net Assets of Long-Term Funds Were Concentrated in No-Load Share Classes . . . . . . . . . . . . . . . . 77

4 2011 INVESTMENT COMPANY FACT BOOK

Chapter 6
Characteristics of Mutual Fund Owners
Figure 6.1: 44 Percent of U.S. Households Owned Mutual Funds in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.2: Characteristics of Mutual Fund Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.3: Mutual Fund Ownership Is Greatest Among 35- to 64-Year-Olds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.4: The U.S. Population and Mutual Fund Shareholders Are Getting Older . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.5: Ownership of Mutual Funds Increases with Household Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
6.6: Employer-Sponsored Retirement Plans Are Increasingly the Source of First Mutual Fund Purchase . . . . . 85
6.7: 72 Percent of Mutual Fund–Owning Households Held Shares Outside Employer-Sponsored
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.8: About Half of Mutual Fund Shareholders Used an Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
6.9: The Average Mutual Fund Account Has Been Open for Five Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
6.10: The Average Shareholder Tenure with a Fund Company Is Eight Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
6.11: Mutual Fund Shareholder Sentiment Rises and Falls with Stock Market Performance . . . . . . . . . . . . . . . . 89
6.12: Households’ Willingness to Take Investment Risk Tends to Move with the S&P 500 Stock Index . . . . . . 90
6.13: Households’ Willingness to Take Investment Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
6.14: Mutual Fund Shareholders’ Confidence Rose in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
6.15: Internet Access Is Widespread Among Mutual Fund–Owning Households . . . . . . . . . . . . . . . . . . . . . . . . . 92
6.16: Most Mutual Fund Shareholders Used the Internet for Financial Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 93
6.17: Mutual Fund Shareholders’ Use of the Internet by Age, Education, and Income for 2010 . . . . . . . . . . . . 94
6.18: Institutional and Household Ownership of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Chapter 7
Retirement and Education Savings
Figure 7.1: Social Security Benefit Formula Is Highly Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.2: U.S. Retirement Assets Increased in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.3: Many U.S. Households Had Tax-Advantaged Retirement Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.4: Younger Households Have Had Higher and Faster Growing Rates of IRA or Defined
Contribution Plan Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.5: Defined Contribution Plan Assets by Type of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
7.6: 401(k) Asset Allocation Varied with Participant Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
7.7: Asset Allocation to Equities Varied Widely Among 401(k) Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . .106
7.8: Target Date Funds’ 401(k) Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.9: 401(k) Balances Tend to Increase with Participant Age and Job Tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
7.10: Use of Lump-Sum Distributions from Defined Contribution Plans at Retirement . . . . . . . . . . . . . . . . . . . 109
7.11: A Variety of Arrangements May Be Used to Compensate 401(k) Service Providers . . . . . . . . . . . . . . . . .111
7.12: 401(k) Stock Mutual Fund Assets Are Concentrated in Lower-Cost Funds . . . . . . . . . . . . . . . . . . . . . . . . 111
7.13: IRA Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
7.14: 49 Million U.S. Households Owned IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
7.15: Rollover Activity in The IRA Investor Database™ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.16: Rollovers Are Often a Source of Assets for Traditional IRA Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.17: Households Invested Their IRAs in Many Types of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
7.18: Withdrawals from Traditional IRAs Are Infrequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
7.19: Traditional IRA Withdrawals Among Retirees Are Often Used to Pay for Living Expenses . . . . . . . . . . . 117
7.20: Households’ Mutual Fund Assets by Type of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
7.21: Bulk of Mutual Fund Retirement Account Assets Was Invested in Equities . . . . . . . . . . . . . . . . . . . . . . . . 119
7.22: Target Date and Lifestyle Mutual Fund Assets by Account Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
7.23: Section 529 Savings Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
7.24: Characteristics of Households Saving for College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .123

FIGURES 5
Investment companies held more than one-quarter
of U.S. corporate equities in 2010

27%
of U.S. corporate equities held
by investment companies
Chapter One

Overview of U.S.-Registered
Investment Companies
U.S.-registered investment companies play a significant role in the U.S.
economy and world financial markets. These funds managed over $13 trillion
in assets at the end of 2010 for over 91 million U.S. investors. Funds supplied
investment capital in securities markets around the world and were among the
largest groups of investors in the U.S. stock, commercial paper, and municipal
securities markets.
 This chapter provides a broad overview of U.S.-registered investment companies—mutual funds, closed-end
funds, exchange-traded funds, and unit investment trusts—and their sponsors.

Investment Company Assets in 2010........................................................................................................................8

Americans’ Continued Reliance on Investment Companies..................................................................................8
Role of Investment Companies in Financial Markets............................................................................................12
Types of Intermediaries and Number of Investment Companies........................................................................13
Investment Company Employment.........................................................................................................................17

Investment Company Assets in 2010

U.S.-registered investment companies managed $13.1 trillion at year-end 2010 (Figure 1.1), a
$943 billion increase from year-end 2009. Major U.S. stock indexes rose between 13 and 17 percent
during the year, significantly increasing total net assets of funds invested in domestic equity
markets. Gains in stock prices abroad had a similar effect on funds invested in foreign stocks.
However, gains in U.S. stock and bond funds that held international assets were moderated
by the strengthening of the U.S. dollar and the resulting decrease in the dollar value of their
foreign securities.

The rise in the value of U.S. fund assets was tempered somewhat by net outflows from money
market funds. Overall, mutual funds reported $297 billion of net outflows in 2010. Investors
pulled $525 billion from money market funds, but added $228 billion to long-term mutual funds.
In addition, mutual fund shareholders reinvested $157 billion of income dividends and $39 billion
of capital gains distributions that mutual funds paid out during the year. Investor demand for
exchange-traded funds (ETFs), unit investment trusts (UITs), and closed-end funds remained
fairly steady. In 2010, flows into ETFs were on pace with the previous year, with net share issuance
(including reinvested dividends) of $118 billion. UITs had new deposits of $31 billion, while closed-
end funds issued $8 billion in new shares during 2010, both up from 2009.

Americans’ Continued Reliance on Investment Companies

Households are the largest group of investors in funds, and registered investment companies
managed 23 percent of households’ financial assets at year-end 2010, little changed from 2009
(Figure 1.2). The increase is largely due to the continued rebound in the value of stocks held in
equity and hybrid funds. As households have increased their reliance on funds, their demand for
directly held stocks has been decreasing for most of the decade with only one year of moderately
renewed interest in 2009 (Figure 1.3). Household demand for directly held bonds rebounded in
2010 after two years of substantially lower demand in 2008 and 2009. In contrast, over the past
decade, households’ net investment in registered investment companies has been substantially

8 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 1.1
Investment Company Total Net Assets by Type
Billions of dollars, year-end, 1995–2010

Mutual funds 1 Closed-end funds ETFs 2 UITs Total 3

1995 $2,811 $143 $1 $73 $3,028
1996 3,526 147 2 72 3,747
1997 4,468 152 7 85 4,712
1998 5,525 156 16 94 5,791
1999 6,846 147 34 92 7,119
2000 6,965 143 66 74 7,248
2001 6,975 141 83 49 7,248
2002 6,383 159 102 36 6,680
2003 7,402 214 151 36 7,803
2004 8,095 254 228 37 8,614
2005 8,891 277 301 41 9,510
2006 10,398 298 423 50 11,168
2007 12,002 313 608 53 12,977
2008 9,604 186 531 29 10,349
2009 11,120 225 777 38 12,161
2010 11,821 241 992 51 13,104
1 Mutual fund data include only mutual funds that report statistical information to the Investment Company Institute. The data
do not include mutual funds that invest primarily in other mutual funds.
2 ETF data prior to 2001 were provided by Strategic Insight Simfund. ETF data include investment companies not registered

under the Investment Company Act of 1940 and exclude ETFs that invest primarily in other ETFs.
3 Total investment company assets include mutual fund holdings of closed-end funds and ETFs.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute and Strategic Insight Simfund

stronger than their net purchases of directly held bonds and stocks. Households invested an
average of $349 billion each year, on net, in registered investment companies versus average
annual sales, on net, of $333 billion in directly held stocks and bonds over the past 11 years.

The growth of individual retirement accounts (IRAs) and defined contribution (DC) plans,
particularly 401(k) plans, in conjunction with the important role that mutual funds play in these
plans, explains some of households’ increased reliance on investment companies during the past
two decades. At year-end 2010, 9 percent of household financial assets were invested in 401(k)
and other DC retirement plans, up from 6 percent in 1990. Mutual funds managed 54 percent
of the assets in these plans in 2010, up from 8 percent in 1990 (Figure 1.4). IRAs made up
10 percent of household financial assets, and mutual funds managed 47 percent of IRA assets
in 2010. Additionally, mutual funds managed $1 trillion in variable annuities outside of retirement
accounts, as well as $4 trillion of assets in taxable household accounts.

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 9

 FIGURE 1.2
Share of Household Financial Assets Held in Investment Companies
Percent, year-end, 1980–2010

23

1980 1985 1990 1995 2000 2005 2010

Note: Household financial assets held in registered investment companies include household holdings of ETFs, closed-end
funds, UITs, and mutual funds. Mutual funds held in employer-sponsored DC plans, IRAs, and variable annuities are included.
Sources: Investment Company Institute and Federal Reserve Board

FIGURE 1.3
Household Net Investments* in Funds, Bonds, and Stocks
Billions of dollars, 2000–2010

Registered investment companies

Directly held bonds
Directly held stock

706

374
278 555
459 520 230
369 175 241 275
173 5 193 218 143
52 92 -41 38
-72 -125 -125
-213 -269 -187
-344 -441 -247
-518 -656
-680
-1,004

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

* Net new cash flow and reinvested interest and dividends are included. Data include mutual funds, variable annuities, ETFs,
and closed-end funds.
Sources: Investment Company Institute and Federal Reserve Board

10 2011 INVESTMENT COMPANY FACT BOOK

Businesses and other institutional investors also rely on funds. Many institutions use money market
funds to manage a portion of their cash and short-term assets. For example, as of year-end 2010,
nonfinancial businesses held 25 percent of their cash in money market funds, although this is down
from 30 percent at year-end 2009. Institutional investors have also contributed to the growing
demand for ETFs. Investment managers, including mutual funds and pension funds, use ETFs to
manage liquidity. This strategy allows them to remain fully invested in the market while holding a
highly liquid asset to manage their investor flows. Asset managers also use ETFs as part of their
investment strategies, including as a hedge for their exposure to equity markets.

For more statistics on investment companies, see the data tables listed on pages 126–127.

FIGURE 1.4
Mutual Funds in Household Retirement Accounts
Mutual fund percentage of retirement assets by type of retirement vehicle, 1990–2010

DC plans*
53 54
50 49
44 45
38
30
23
16
8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

IRAs
48 47 49 47
46 45
41 42
34
28
22

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

* DC plans include 403(b) plans, 457 plans, and private employer-sponsored DC plans (including 401(k) plans).
Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined Contribution
Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 11

Role of Investment Companies in Financial Markets
Investment companies have been among the largest investors in the domestic financial markets
for much of the past 20 years and held a significant portion of the outstanding shares of U.S.-
issued stocks, bonds, and money market securities at year-end 2010. Investment companies as
a whole were one of the largest group of investors in U.S. companies, holding 27 percent of their
outstanding stock at year-end 2010 (Figure 1.5).

Investment companies continued to be the largest investor in the U.S. commercial paper market—
an important source of short-term funding for major U.S. and foreign corporations. However,
mutual funds’ share of the commercial paper market decreased to 45 percent of outstanding
commercial paper at year-end 2010 from 51 percent at year-end 2009. Money market funds account
for the majority of funds’ commercial paper holdings, and the share of outstanding commercial
paper these funds hold tends to fluctuate with investor demand for money market funds and the
overall supply of commercial paper. While 2010 marked the fourth year in a row that the total dollar
amount of outstanding commercial paper contracted, prime money market funds, which invest in
commercial paper, also experienced the largest outflows from their funds since 2003.

FIGURE 1.5
Investment Companies Channel Investment to Stock, Bond, and Money Markets
Percentage of total market securities held by investment companies, year-end 2010

Mutual funds
Other registered investment companies
45

33
27
45
13 29
23 11

12 11
4 1 <0.5 3
U.S. corporate U.S. and foreign U.S. Treasury U.S. municipal Commercial
equity corporate bonds and government securities paper
agency securities

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute, Federal Reserve Board, and World Federation of Exchanges

12 2011 INVESTMENT COMPANY FACT BOOK

At year-end 2010, investment companies held 33 percent of tax-exempt debt issued by U.S.
municipalities, which is on par with direct household ownership. Funds’ share of the tax-exempt
market has remained fairly stable in the past several years despite changes in the demand for
tax-exempt funds and the overall supply of tax-exempt debt. Funds held 11 percent of U.S. Treasury
and government agency securities at year-end 2010. Inflows into bond funds, which increased
their holdings of U.S. Treasury and government agency securities, largely offset sales by U.S.
government money market funds. Funds’ share of U.S. government debt securities remained
4 percentage points higher than at year-end 2006, prior to the start of the financial crisis.
Funds’ role in the corporate bond market expanded somewhat in 2010. Funds held 13 percent
of the outstanding debt securities in this market compared to 11 percent at year-end 2009.

Types of Intermediaries and Number of Investment Companies

A variety of financial service companies offer registered funds in the United States. By year-end
2010, 74 percent of fund complexes were independent fund advisers (Figure 1.6), and these
firms managed more than half of investment company assets. Non-U.S. fund advisers, banks,
thrifts, insurance companies, and brokerage firms are other types of fund complexes in the
U.S. marketplace.

FIGURE 1.6
Nearly Three-Quarters of Fund Complexes Were Independent Fund Advisers
Percentage of investment company complexes by type of intermediary, year-end 2010

11%
Non-U.S. fund advisers
6%
Insurance companies
8%
74% Banks or thrifts
Independent fund advisers 3%
Brokerage firms

Note: Components do not add to 100 percent because of rounding.

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 13

In 2010, there were 669 financial firms from around the world that competed in the U.S. market to
provide investment management services to fund investors. Historically, low barriers to entry have
attracted a large number of investment company sponsors to the fund marketplace in the United
States. These low barriers to entry led to a rapid increase in the number of fund sponsors in the
1980s and 1990s. However, competition among these sponsors and pressure from other financial
products have reversed this trend over the past decade. From year-end 2000 to year-end 2010,
502 fund sponsors left the fund business. In the same time, 379 new firms entered (Figure 1.7).
The overall effect has been a net reduction of 16 percent in the number of industry firms serving
investors. The decrease in the number of advisers has occurred with larger fund sponsors acquiring
some smaller fund families and with some fund advisers liquidating funds and leaving the fund
business. In addition, several other large sponsors of funds sold their fund advisory businesses.
The portion of fund companies that have been able to retain assets in addition to attracting new
investments has been generally lower in this decade than during the 1990s (Figure 1.8). Two
bear markets leading to outflows from stock funds and other competitive pressures affected the
profitability of fund sponsors and contributed to the decline in their number over the past 10 years.

FIGURE 1.7
Number of Fund Sponsors
2000–2010

Total number of fund sponsors at year-end (right axis)

Fund sponsors exiting (left axis)
Fund sponsors entering (left axis)

100 900
792 776
90 800
729 718 705 707 705 720 705
80 678 669 700
70 64 62 600
60 55 55 52
47 49 46 44 49
48 500
50 44 44 47
43 40 40 400
40
31
30 27 25
300

20 16 17 200

10 100

0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

14 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 1.8
Fund Complexes with Positive Net New Cash Flow to Stock, Bond, and Hybrid Funds
Percent, selected years

72
64 64
57 55 55 56 56 58
53 50 51
38

1990 1992 1994 1996 1998 2000 2002 2004 2006 2007 2008 2009 2010

The decline in the number of fund sponsors has been concentrated primarily among those advising
mutual funds, and their exit from the industry has caused the growth in the number of mutual
funds to slow in recent years and to decline over the past two years. Competitive dynamics also
affect the number of funds offered in any given year by the fund advisers that remain. In particular,
fund sponsors create new funds to meet investor demand, and they merge or liquidate funds that
do not attract sufficient investor interest. The pace of newly opened funds continued to slow in
2010 to its lowest level since 1996. Nevertheless, the rate of fund mergers and liquidations dropped
appreciably from 2009 and, as a result, the number of mutual funds was reduced, on net, by only
15 funds in 2010 (Figure 1.9).

FIGURE 1.9
Number of Mutual Funds Leaving and Entering the Industry*
2000–2010

Merged mutual funds

Liquidated mutual funds
Opened mutual funds

1,111

858 845
737 704 730 708
665 680 665
559 534 534 586 536 573 349
498 496 505 464 479
397 310 394 438
248 336 252
237 315 252
231
496
261 340 355 286 286 250 221 321 227
207
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

* Data include mutual funds that do not report statistical information to the Investment Company Institute. Data also include
mutual funds that invest primarily in other mutual funds.

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 15

The total number of other investment companies has fallen considerably since 2000, as sponsors
of UITs have been creating fewer new trusts (Figure 1.10). These investment companies often have
preset termination dates, and in conjunction with a slowdown in the creation of new UITs, the total
number of UITs has declined substantially. Additionally, closed-end fund sponsors shut down four
more funds than they opened in 2010. Sponsors of ETFs, however, opened 130 new funds, on net,
in 2010.

FIGURE 1.10
Number of Investment Companies1 by Type
Year-end, 1995–2010

Mutual funds 2 Closed-end funds ETFs 3 UITs Total

1995 5,761 500 2 12,979 19,242
1996 6,293 497 19 11,764 18,573
1997 6,778 487 19 11,593 18,877
1998 7,489 492 29 10,966 18,976
1999 8,003 512 30 10,414 18,959
2000 8,370 482 80 10,072 19,004
2001 8,518 492 102 9,295 18,407
2002 8,511 545 113 8,303 17,472
2003 8,426 584 119 7,233 16,362
2004 8,415 619 152 6,499 15,685
2005 8,449 635 204 6,019 15,307
2006 8,721 647 359 5,907 15,634
2007 8,747 664 629 6,030 16,070
2008 8,884 643 743 5,984 16,254
2009 8,617 628 820 6,049 16,114
2010 8,545 624 950 5,971 16,090
1 Investment company data include only investment companies that report statistical information to the Investment Company
Institute.
2 The data include mutual funds that invest primarily in other mutual funds.

3 ETF data prior to 2001 were provided by Strategic Insight Simfund. ETF data include investment companies not registered

under the Investment Company Act of 1940 and ETFs that invest primarily in other ETFs.
Sources: Investment Company Institute and Strategic Insight Simfund

16 2011 INVESTMENT COMPANY FACT BOOK

Investment Company Employment
Fund sponsors and third-party service providers offer advisory, recordkeeping, administrative,
custody, and other services to a growing number of funds and their investors. From 1997 to 2009,
fund industry employment in the United States grew 38 percent from 114,000 workers to 157,000
workers (Figure 1.11). Based on results of an ICI biennial survey, employment peaked in 2007 at
168,000. From March 2007 to March 2009, fund sponsors and their service providers trimmed
about 11,000 workers from their payrolls as part of an overall cost-cutting focus in the face of
substantially lower revenues from the declines in the stock and bond markets over this period.

FIGURE 1.11
Investment Company Industry Employment
Estimated number of employees of registered investment companies, selected years*

168,000
149,000 154,000 157,000
146,000
114,000

1997 1999 2000 2005 2007 2009

* Years in which the ICI employment survey was conducted.

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 17

The largest group of workers provides services to fund investors and their accounts, with
36 percent of fund employees involved in these activities in March 2009 (Figure 1.12). Shareholder
account servicing encompasses a wide range of activities to help investors monitor and update
their accounts. These employees work in call centers and help shareholders and their financial
advisers with questions about investor accounts. They also process applications for account
openings and closings. Other services include retirement plan transaction processing, retirement
plan participant education, participant enrollment, and plan compliance.

At the same time, 28 percent of the industry’s workforce was employed by a fund’s investment
adviser or a third-party service provider in support of portfolio management functions such as
investment research, trading and security settlement, information systems and technology, and
other corporate management functions. Jobs related to fund administration, including financial
and portfolio accounting and regulatory compliance duties, accounted for 11 percent of industry
employment. Personnel involved with distribution services (e.g., marketing, product development
and design, investor communications) represented 16 percent of the workforce. Sales-force
employees—including registered representatives and sales support staff where at least 50 percent
of the employee’s income is derived from fund sales—and fund supermarket representatives
accounted for 9 percent of fund industry jobs.

FIGURE 1.12
Investment Company Industry Employment by Job Function
Percentage of employees in registered investment company operations areas, March 2009

9% 16%
Sales Distribution

11%
36% Fund administration
Shareholder account
services

28%
Fund management

Total employment: 157,000

18 2011 INVESTMENT COMPANY FACT BOOK

For many industries, employment tends to be concentrated in locations of the industry’s origins,
and investment companies are no exception. Massachusetts and New York served as early hubs
of investment company operations, and remained so in March 2009 (Figure 1.13), employing
nearly 30 percent of the workers in the fund industry. As the industry has grown from its early
roots, other states have become significant centers of fund employment—including California,
Pennsylvania, and Texas. Fund companies in these states employed about one-quarter of all fund
industry employees as of March 2009.

FIGURE 1.13
Investment Company Industry Employment by State
Estimated number of employees of registered investment companies by state, March 2009

4,000 or more
1,500 to 3,999
500 to 1,499
100 to 499
0 to 99

OVERVIEW OF U.S.-REGISTERED INVESTMENT COMPANIES 19

Nearly half of mutual fund assets were in equity funds

48%
were in equity funds
Chapter Two

Recent Mutual Fund Trends

With $11.8 trillion in assets, the U.S. mutual fund industry remained the largest
in the world at year-end 2010. Total net assets increased $700 billion from the
level at year-end 2009, largely reflecting the continued rise in stock prices in
2010. At the same time, investor demand for mutual funds declined further
in 2010 with net withdrawals from all types of mutual funds amounting to
$297 billion. Investor demand for certain types of mutual funds appeared to
be driven in large part by the interest rate environment and the tepid pace of
the economic recovery. In 2010, money market funds continued to experience
substantial outflows and equity funds saw net withdrawals for the third
consecutive year. While inflows to bond funds were still strong, they slowed
appreciably from their record high in 2009.
 This chapter describes recent U.S. mutual fund developments and examines the market factors that affect
the demand for equity, bond, hybrid, and money market funds.

U.S. Mutual Fund Assets..........................................................................................................................................22

Developments in Mutual Fund Flows......................................................................................................................24
Demand for Long-Term Mutual Funds....................................................................................................................26
Equity Mutual Funds.........................................................................................................................................26
Bond and Hybrid Mutual Funds........................................................................................................................29
Index Mutual Funds...........................................................................................................................................32
Demand for Money Market Funds...........................................................................................................................34
Retail Money Market Funds..............................................................................................................................34
Institutional Money Market Funds....................................................................................................................36

U.S. Mutual Fund Assets

Investor demand for mutual funds is influenced by a variety of factors, not least of which is funds’
ability to assist investors in achieving their investment objectives. For example, U.S. households
rely on equity, bond, and hybrid mutual funds to meet long-term personal financial objectives
such as preparing for retirement. U.S. households, businesses, and other institutional investors use
money market funds as cash management tools because they provide a high degree of liquidity and
competitive, short-term yields. Investors’ reactions to changes in U.S. and worldwide economic and
financial conditions play an important role in determining how demand for specific types of mutual
funds and for mutual funds in general evolves over time.

The U.S. mutual fund market—with $11.8 trillion in assets under management at year-end 2010—
remained the largest in the world, accounting for 48 percent of the $24.7 trillion in mutual fund
assets worldwide (Figure 2.1).

Equity funds made up 48 percent of U.S. mutual fund assets at year-end 2010 (Figure 2.1).
Domestic equity funds (those that invest primarily in shares of U.S. corporations) held 35 percent
of total industry assets. World equity funds (those that invest primarily in foreign corporations)
accounted for another 13 percent. Money market funds accounted for 24 percent of U.S. mutual
fund assets. Bond funds (22 percent) and hybrid funds (6 percent) held the remainder of total
U.S. mutual fund assets.

Approximately 600 sponsors managed mutual fund assets in the United States in 2010. Long-
run competitive dynamics have prevented any single firm or group of firms from dominating the
market. For example, of the largest 25 fund complexes in 1985, 13 remained in this top group in
2010. Another measure of market concentration is the Herfindahl-Hirschman Index, which weighs

22 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 2.1
The U.S. Had the World’s Largest Mutual Fund Market
Percentage of total net assets, year-end 2010

Percentage of U.S. mutual fund assets

By type of fund
7%
Other Americas
13% 35 Domestic stock funds
Africa and
Asia/Pacific
13 International stock funds
48%
United States
22 Bond funds
32%
Europe
24 Money market funds

6 Hybrid funds

Total worldwide mutual fund assets: Total U.S. mutual fund assets:
$24.7 trillion $11.8 trillion

Sources: Investment Company Institute, European Fund and Asset Management Association, and other national mutual fund
associations

both the number and relative size of firms in the industry. Index numbers below 1,000 indicate that
an industry is unconcentrated. The mutual fund industry had a Herfindahl-Hirschman Index number
of 465 as of December 2010.

In this past decade, however, the percentage of industry assets at larger fund complexes has
increased. The share of assets managed by the largest 25 firms increased to 74 percent in 2010
from 68 percent in 2000 (Figure 2.2). In addition, the share of assets managed by the largest
10 firms in 2010 was 53 percent, up from the 44 percent share managed by the largest 10 firms
in 2000.

FIGURE 2.2
Share of Assets at the Largest Mutual Fund Complexes
Percentage of industry total net assets, year-end, selected years

1985 1990 1995 2000 2005 2009 2010

Top 5 complexes 37 34 34 32 37 39 40
Top 10 complexes 54 53 48 44 48 53 53
Top 25 complexes 78 75 71 68 70 74 74

RECENT MUTUAL FUND TRENDS 23

Several factors likely contributed to this development. One factor is the acquisition of smaller fund
complexes by larger ones. Second, total returns on U.S. stocks averaged only a little over 1 percent
annually from year-end 1999 to year-end 2010 and likely held down assets managed by fund
complexes that concentrate their offerings primarily in domestic equity funds—many of which tend
to be smaller fund complexes. Third, in contrast, total returns on bonds averaged over 6 percent
annually in the past 11 years. Finally, strong inflows over the decade to bond funds, which are fewer
in number and have fewer fund sponsors than equity mutual funds, helped boost the share of
assets managed by those large fund complexes that offer bond funds.

Developments in Mutual Fund Flows

Investor demand for mutual funds as measured by net new cash flow—the dollar value of new
fund sales less redemptions combined with net exchanges—declined further in 2010. Overall, the
industry had a net cash outflow of $297 billion (Figure 2.3). Investors pulled $525 billion from
money market funds, particularly institutional funds. Investors, however, added $228 billion, on
net, to long-term funds. The $297 billion total net outflow in 2010 was the largest on record in
dollar terms. As a percentage of the average market value of assets, it amounted to 2.7 percent.
On this basis, the outflow was about the same as the $23 billion outflow in 1988, which measured
2.8 percent of average assets.

Conditions in financial markets continued to improve in 2010. The Federal Reserve closed several
special credit and liquidity programs that had been instituted during the financial crisis in 2008.
U.S. stock prices, as measured by the Wilshire 5000 Total Market Index, rose over 15 percent,
putting the index almost back to its August 2008 level. Credit spreads on corporate bonds—the
difference in yields between investment-grade corporate bonds and Treasury securities—remained
fairly stable over the year, hovering around 200 basis points. Nevertheless, the pace of economic
activity was fairly modest during 2010—held down by persistently high unemployment, modest
income growth, lower housing wealth, and tight credit conditions for households. Consequently,
the Federal Reserve kept the federal funds rate in a target range of 0 percent to 0.25 percent.

Abroad, many developed European countries experienced slower economic growth and weaker
stock prices than that of the United States in 2010. Emerging markets experienced gains in stock
prices that were about on par with the United States.

24 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 2.3
Net Flows to Mutual Funds
Billions of dollars, 1996–2010

878

477 504 472

375 363 388 412
321
254
75 53

-48
-149
-297
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RECENT MUTUAL FUND TRENDS 25

Demand for Long-Term Mutual Funds
Investors added $228 billion in net new cash to equity, bond, and hybrid funds in 2010, down from
the record pace of $390 billion in 2009. Bond and hybrid funds remained popular investment
choices by investors, while domestic equity funds continued to experience outflows in 2010.

Equity Mutual Funds

Investors withdrew cash from equity funds—particularly domestic equity funds—in 2010 at a
faster pace than in 2009. In 2010, withdrawals from all equity funds amounted to $37 billion for
the year, more than the $9 billion investors withdrew, on net, the previous year. Generally, demand
for equity funds is strongly related to performance in the stock markets (Figure 2.4). Net flows to
equity funds tend to rise with stock prices and the opposite tends to occur when stock prices fall.
In the past two years, one would have expected sizable inflows to equity funds given the strong
rally in stock prices worldwide. Since year-end 2008, major U.S. stock price indexes rose between
45 and 50 percent including any dividends that were paid. The technology-heavy NASDAQ
Composite Index rose 68 percent. Despite these gains, domestic equity funds experienced a net
outflow of $39 billion in 2009 and $96 billion in 2010. Indeed, domestic equity funds have had
four consecutive years of withdrawals totaling $335 billion.

FIGURE 2.4
Net Flows to Equity Funds Related to Global Stock Price Performance
1996–2010

Billions of dollars Percentage points

40 60
Total return on equities2 50
30
40
20 30
20
10
10
0 0
-10
-10
-20
Net new cash flow 1
-20 -30
-40
-30
-50
-40 -60
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Net new cash flow to equity funds is plotted as a six-month moving average.
2 Thetotal return on equities is measured as the year-over-year change in the MSCI All Country World Daily Total Return Index.
Sources: Investment Company Institute and Morgan Stanley Capital International

26 2011 INVESTMENT COMPANY FACT BOOK

Funds investing in foreign companies fared somewhat better than domestic equity funds.
International equity funds garnered $31 billion in net new cash in 2009 and $59 billion in 2010.
These inflows, however, were still modest when compared with past inflows and total returns on
stocks traded on many foreign stock markets. The MSCI All Country World Daily Total Return Index
(excluding U.S. stocks) increased 25 percent annually over the two-year period from year-end 2008
to year-end 2010; the MSCI Daily Total Return Emerging Markets Index rose 46 percent annually. To
put this development in perspective with past experience, from 2004 to 2007, the MSCI All Country
World Daily Total Return Stock Index increased at an average annual rate of 20 percent, and
shareholders invested over $100 billion on average annually into international equity funds.

One factor that may partly explain investors’ reduced demand for equity funds is a lower tolerance
for risk. In the past decade, households have endured two of the worst bear markets in stocks
since the Great Depression. U.S. household surveys show that even within specified age groups,
willingness to take investment risk has dropped since the late 1990s and early 2000s (Figure 2.5).
For example, only 22 percent of households headed by someone younger than 35 in 2010 were
willing to take above-average or substantial investment risk, compared with 30 percent of such
households in 1998. The aging of the population also likely has played a role in reducing demand
for equity funds. As investors grow older, their willingness to take investment risk tends to decline.
In 2010, only 10 percent of households headed by someone 65 or older were willing to take above-
average or substantial investment risk, versus 26 percent of households headed by someone
between 35 and 49 years old.

FIGURE 2.5
Willingness to Take Above-Average or Substantial Investment Risk by Age
Percentage of U.S. households by age of head of household,* selected years

30 30 29
27 26 26 26
24 24 24 24 23
22 22 21 20 19 20 19 19
15
9 8 8 8 10
6 7

’95 ’98 ’01 ’04’07 ’09 ’10 ’95 ’98 ’01 ’04’07 ’09 ’10 ’95 ’98 ’01 ’04’07 ’09 ’10 ’95 ’98 ’01 ’04’07 ’09 ’10
Younger than 35 35 to 49 50 to 64 65 or older

Age of head of household*

* Age is based on the age of the sole or co-decisionmaker for household saving and investing.
Sources: Investment Company Institute and Federal Reserve Board

RECENT MUTUAL FUND TRENDS 27

 Asset-Weighted Turnover Rate
The turnover rate—the lesser of purchases or sales (excluding those of short-term assets)
in a fund’s portfolio scaled by average net assets—is a measure of a fund’s trading activity.

To analyze the turnover rate that shareholders actually experience in their funds, it is
important to identify those funds in which shareholders are most heavily invested. Neither
a simple average nor a median takes into account where fund assets are concentrated.
An asset-weighted average gives more weight to funds with large amounts of assets,
and accordingly, indicates the average portfolio turnover actually experienced by fund
shareholders. In 2010, the asset-weighted annual turnover rate experienced by equity fund
investors moved down to 53 percent, somewhat below the average experience of the past
37 years (Figure 2.6).

Investors tend to own equity funds with relatively low turnover rates. In 2010, about half of
equity fund assets were in funds with portfolio turnover rates under 35 percent. This reflects
shareholders’ tendency to own equity funds with below-average turnover and the propensity
for funds with below-average turnover to attract more shareholder dollars.

FIGURE 2.6
Turnover Rate1 Experienced by Equity Fund Investors 2
Percent, 1974–2010

100

80

60

40
Average over 1974−2010: 58%
20

0
’74 ’76 ’78 ’80 ’82 ’84 ’86 ’88 ’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10

1 The turnover rate is an asset-weighted average.

2 Dataexclude mutual funds available as investment choices in variable annuities.
Sources: Investment Company Institute, Center for Research in Security Prices (CRSP), and Strategic Insight Simfund

28 2011 INVESTMENT COMPANY FACT BOOK

Bond and Hybrid Mutual Funds
Secular and demographic factors that appear to have tempered inflows into equity funds likely
have served to boost flows into bond funds. In 2010, investors added $241 billion to their bond fund
holdings—a strong rate, albeit down from the record $376 billion pace of net investment in the
previous year. Traditionally, cash flow into bond funds is highly correlated with the performance of
bonds (Figure 2.7). The U.S. interest rate environment typically has played a prominent role in the
demand for bond funds. Movements in short- and long-term interest rates can significantly impact
the returns offered by these types of funds and, in turn, influence retail and institutional investor
demand for bond funds. Low short-term interest rates and the relatively steep yield curve likely
continued to entice some investors to shift out of money market funds and into bond funds in 2010.

The pace of inflows into bond funds was quite strong through the first nine months of 2010, but
slowed appreciably—particularly for tax-exempt bond funds—in the fourth quarter and turned
negative in the last couple of months of the year. This pattern likely was the result of market
conditions. From year-end 2009 through September 2010, returns on investment-grade corporate
bonds were about 6 percent and those of municipal securities at over 4 percent. Returns on these
securities turned negative in the fourth quarter of 2010.

FIGURE 2.7
Net Flows to Bond Funds Related to Bond Returns
1996–2010

Percentage of total net assets Percentage points

2.5 20

2.0
Total return on bonds2

1.5 15

1.0
10
0.5

0.0
5
-0.5
Net new cash flow1
-1.0
0
-1.5

-2.0 -5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Net new cash flow to bond funds is plotted as a three-month moving average of net new cash flow as a percentage of
previous month-end assets. The data exclude flows to high-yield bond funds.
2 The total return on bonds is measured as the year-over-year change in the Citigroup Broad Investment Grade Bond Index.

Sources: Investment Company Institute and Citigroup

RECENT MUTUAL FUND TRENDS 29

One contributing factor to the decline in bond returns likely was the glut of bond issuance by
municipalities before the expiration of the Build America Bonds program at the end of the year.
The outsized supply helped drive up interest rates for municipal securities and reportedly enticed
buyers that normally would purchase corporate securities to cross over and buy securities in the
municipal market. In addition, investor concerns about inflationary pressure from the Federal
Reserve’s second round of quantitative easing, the ability of the federal government to finance
growing budget deficits at attractive interest rates, and the deterioration in the outlook for state
and local governments’ fiscal positions were cited as possible reasons for the downturn in the bond
market at the end of 2010.

Despite the relative weakness in bond flows in the fourth quarter of 2010, inflows to bond funds
since 2004 have been stronger than what would have been expected based on the historical
relationship between bond returns and demand for bond funds. A few secular and demographic
factors may have contributed to this development: the aging of the U.S. population, the reduced
appetite for investment risk by investors of all ages, and the increasing use of target date and other
asset allocation funds, many of which are offered in a funds of funds structure. First, the leading
edge of the Baby Boom Generation has just started to retire, and because investors’ willingness
to take investment risk tends to decline as they age (Figure 2.5), it is natural for them to allocate
their investments increasingly toward fixed-income securities. Second, the decline in risk tolerance
across all age groups (Figure 2.5) likely boosted flows into bond funds over the past couple of
years. Last, funds of funds remained a popular choice with investors and a portion of the flows into
these funds was directed to underlying bond funds. Funds of funds garnered $134 billion in net new
cash flow in 2010 (Figure 2.8).

Investor demand for hybrid funds, which invest in a combination of stocks and bonds, remained
steady in 2010, with investors adding $23 billion, on net, to these funds—about the same pace as
in 2009. Over the six-year period of 2005 to 2010, hybrid funds attracted a total of $84 billion in
net new cash.

30 2011 INVESTMENT COMPANY FACT BOOK

 Funds of Funds
Funds of funds are mutual funds that primarily hold and invest in shares of other mutual
funds. The most popular type of these funds is hybrid funds—over 80 percent of funds of
funds’ total net assets were in hybrid funds in 2010. Hybrid funds of funds invest their cash
in underlying equity, bond, and hybrid mutual funds.

Assets of funds of funds have grown rapidly over the past decade. By the end of 2010,
the number of funds of funds had grown to 964, and total net assets were $928 billion
(Figure 2.8). About two-thirds of the increase in the assets of funds of funds in the past
10 years is attributable to increasing investor interest in target date funds (also known as
lifecycle funds) and lifestyle funds (also known as target risk funds). The growing popularity
of these funds, especially for retirement investing, likely reflects the automatic rebalancing
features of these products. Target date funds allow a predetermined allocation of risk over
time, and lifestyle funds maintain a predetermined risk level. Since year-end 2000, funds of
funds received a total of $673 billion in net new cash, of which 62 percent was from target
date and lifestyle funds.

For more information on target date and lifestyle funds, see page 120.

FIGURE 2.8
Total Net Assets and Net Flows to Funds of Funds
2000–2010

Number of funds Assets Net new cash flow

Year-end Billions of dollars, year-end Billions of dollars, annual
2000 215 $57 $10
2001 213 63 9
2002 268 69 12
2003 301 123 30
2004 375 200 51
2005 475 306 79
2006 603 470 101
2007 720 637 126
2008 862 487 62
2009 932 673 69
2010 964 928 134

RECENT MUTUAL FUND TRENDS 31

Index Mutual Funds
Index funds continued to remain popular with investors. Of households that owned mutual funds,
31 percent owned at least one index mutual fund in 2010. As of year-end 2010, 365 index funds
managed total net assets of $1 trillion. Similar to funds of funds, demand for index funds remained
strong in 2010 with investors adding $58 billion in net new cash flow to these funds (Figure 2.9).
About 40 percent of the new money that flowed to index funds was invested in funds indexed to
bond indexes, while one-third was directed toward funds indexed to global and international stock
indexes and one-quarter went to funds indexed to domestic stock indexes. Demand for global and
international equity index funds picked up in 2010, with these funds experiencing an aggregate
inflow of $19 billion.

FIGURE 2.9
Net Flows to Index Funds
Billions of dollars, 1996–2010

Bond and hybrid

Global/International equity
Domestic equity

62 61
56 58
5
2
17
46
5 40 35 24
2 35 27
35 7 33
2 17 10
4 2 6
1 54 26 27 25 28 8
25 2 4
2 2
1 39 8 7 8 19
1 2 11
30 31 28 8 31
28 25
22 21 18 17 14 14
11
-6
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Note: Components may not add to the total because of rounding.

32 2011 INVESTMENT COMPANY FACT BOOK

Equity index funds accounted for the bulk of index mutual fund assets at year-end 2010.
Eighty-one percent of index mutual fund assets were invested in index funds that track either
the S&P 500 or other domestic and international stock indexes (Figure 2.10). Funds indexed to
the S&P 500 managed 37 percent of all assets invested in index mutual funds. The share of assets
invested in equity index funds relative to all equity mutual funds assets moved up to 14.5 percent
in 2010 (Figure 2.11).

FIGURE 2.10
37 Percent of Index Fund Assets Were Invested in S&P 500 Index Funds
Percent, year-end 2010

12%
Global/International equity

19% 37%
Bond and hybrid S&P 500

32%
Other domestic equity

Total: $1.0 trillion

FIGURE 2.11
Equity Index Funds’ Share Continued to Rise
Percentage of equity mutual fund assets, 1996–2010

14.5
13.0 13.7
11.0 11.3 11.1 11.2 11.5
10.6
9.8
8.9 9.0
8.2
6.6
5.2

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RECENT MUTUAL FUND TRENDS 33

Demand for Money Market Funds
Money market funds continued to experience substantial outflows in 2010. This trend likely reflects
the search by investors for higher yields in an environment of low short-term interest rates
accompanied by a steep yield curve and a continued unwinding of the flight to safety in response
to the financial crisis of 2007 and 2008.

Retail Money Market Funds

Retail money market funds, which are principally sold to individual investors, saw a total outflow
of $125 billion in 2010, following an outflow of $309 billion in 2009 (Figure 2.12). Money market
fund yields continued to follow the pattern of short-term interest rates in 2010, hovering between
0 and 25 basis points. In addition, yields on money market funds remained consistently below
those on bank deposits for the past two years (Figure 2.13)­—an unprecedented occurrence since
the inception of money market funds in the early 1970s. In general, retail investors tend to withdraw
cash from money market funds when the difference in interest rates between bank deposits and
money market funds narrows. The sizable outflows from retail money market funds in 2009 and
2010 do not appear to be atypical considering the negative interest rate spread.

FIGURE 2.12
Net Flows to Money Market Funds
Billions of dollars, 1996–2010

Retail funds

131 171
82 96 113
53 47 44 36 2

-81 -89 -125

-152
-309
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Institutional funds 483 525

339

116 149
104 112 60
37 57 35

-112 -68
-230
-399
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

34 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 2.13
Net Flows to Taxable Retail Money Market Funds Related to Interest Rate Spread
1996–2010

Percentage of total net assets Percentage points

5 5

4 4

3 3
Interest rate spread2
2 2

1 1

0 0

-1 -1
Net new cash flow1
-2 -2

-3 -3
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Net new cash flow is a percentage of previous month-end taxable retail money market fund assets and is shown as a
six-month moving average.
2 The interest rate spread is the difference between the taxable retail money market fund yield and the average interest

rate on money market deposit accounts.

Sources: Investment Company Institute, iMoneyNet, and Bank Rate Monitor

RECENT MUTUAL FUND TRENDS 35

Institutional Money Market Funds
Institutional money market funds—used by businesses, pension funds, state and local governments,
and other large-account investors—had outflows of $399 billion in 2010, following outflows of
$230 billion during the previous year (Figure 2.12). Outflows from institutional money market
funds likely reflected the low interest rate environment and the continued unwinding of the flight
to quality by these investors in 2007 and 2008.

The tumult in financial markets around the world that started in August 2007 and continued
through early 2009 led many institutional investors to seek the liquidity and safety of money
market funds that invest primarily in U.S. government securities. These funds, which can invest
in U.S. Treasury debt solely or a combination of U.S. Treasury debt and obligations of U.S.
government agencies, received $881 billion in net new cash flow from institutional investors
in 2007 and 2008 (Figure 2.14). As financial markets stabilized in 2009 and 2010, institutional
investors shifted away from U.S. government money market funds, withdrawing $537 billion, on
net, from these funds over the past two years. Nevertheless, U.S. government money market funds
comprised nearly 39 percent of institutional taxable money market assets at year-end 2010, up
from only 24 percent at year-end 2006, prior to the start of the financial crisis.

FIGURE 2.14
Total Net Assets and Net Flows to Taxable U.S. Government and Non-Government
Institutional Money Market Funds
Billions of dollars, 2001–2010

U.S. government Non-government

Total net assets Net new cash flow Total net assets Net new cash flow
Year-end Annual Year-end Annual
2001 $296 $73 $787 $255
2002 301 -0.4 818 20
2003 272 -32 733 -95
2004 256 -20 675 -64
2005 276 17 745 33
2006 289 9 901 130
2007 578 281 1,106 169
2008 1,204 600 1,076 -75
2009 903 -310 1,181 108
2010 677 -227 1,058 -132

36 2011 INVESTMENT COMPANY FACT BOOK

U.S. nonfinancial businesses continued to reduce their holdings of money market funds in 2010.
During the financial crisis, corporate treasurers made extensive use of institutional money market
funds; at year-end 2008, 36 percent of their short-term assets were in money market funds
(Figure 2.15). By year-end 2010, nonfinancial businesses held 25 percent of their short-term
assets in money market funds, back to approximately the same proportion measured at year-end
2006, prior to the start of the financial crisis.

For more complete data on money market funds, see section 4 in the data tables on pages 164–171.

FIGURE 2.15
Money Market Funds Managed 25 Percent of U.S. Businesses’ Short-Term Assets* in 2010
Percent, year-end, 1996–2010

36
29 30
27 28
25
23 22 23
21
18 19
17
14
12

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

* U.S. nonfinancial businesses’ short-term assets consist of foreign deposits, checkable deposits, time and savings deposits,
money market funds, repurchase agreements, and commercial paper.
Sources: Investment Company Institute and Federal Reserve Board

For More Information

»» Frequently Asked Questions About Bond Mutual Funds
»» Frequently Asked Questions About Money Market Funds
»»“Pricing of U.S. Money Market Funds,” ICI Research Report
Available at www.ici.org.

RECENT MUTUAL FUND TRENDS 37

Total net assets of ETFs reached nearly $1 trillion
at year-end 2010

$992 billion
at year-end 2010
Chapter Three

Exchange-Traded Funds
Over the past decade, demand for ETFs has grown markedly as investors—
both institutional and retail—increasingly turn to them as investment options
in their portfolios. With the increase in demand, sponsors have offered more
ETFs with a greater variety of investment objectives. While ETFs share some
basic characteristics with mutual funds, there remain key operational and
structural differences between the two types of investment products.
 This chapter provides an overview of exchange-traded funds (ETFs)—how they are created, how they differ
from mutual funds, how they trade, the demand by investors for ETFs, and the characteristics of ETF-owning
households.

What Is an ETF?.........................................................................................................................................................40
Total Net Assets of ETFs..........................................................................................................................................40
Creation of an ETF.....................................................................................................................................................42
ETFs and Mutual Funds.............................................................................................................................................43
Key Differences..................................................................................................................................................43
How ETFs Trade.........................................................................................................................................................44
Demand for ETFs.......................................................................................................................................................45
Characteristics of ETF-Owning Households..........................................................................................................50

What Is an ETF?
An ETF is an investment company, typically an open-end investment company (open-end fund)
or unit investment trust, whose shares are traded intraday on stock exchanges at market-
determined prices. Investors may buy or sell ETF shares through a broker just as they would
the shares of any publicly traded company.

ETFs are a relatively recent innovation to the investment company concept. The first ETF—a
broad-based domestic equity fund tracking the S&P 500 index—was introduced in 1993 after
a fund sponsor received U.S. Securities and Exchange Commission (SEC) exemptive relief from
various provisions of the Investment Company Act of 1940 that would not otherwise allow the
ETF structure. Until 2008, SEC exemptive relief was granted only to ETFs that tracked designated
indexes. These ETFs, commonly referred to as index-based ETFs, are designed to track the
performance of their specified indexes or, in some cases, a multiple of or an inverse (or a
multiple of an inverse) of their indexes.

In early 2008, the SEC first granted exemptive relief to several fund sponsors to offer fully
transparent actively managed ETFs that meet certain requirements. These actively managed ETFs
must disclose each business day on their publicly available websites the identities and weightings
of the component securities and other assets held by the ETF. Actively managed ETFs do not seek
to track the return of a particular index. Instead, an actively managed ETF’s investment adviser, like
that of an actively managed mutual fund, creates a unique mix of investments to meet a particular
investment objective and policy.

Total Net Assets of ETFs

By the end of 2010, the total number of index-based and actively managed ETFs had grown to
923, and total net assets were $992 billion (Figure 3.1).

40 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 3.1
Total Net Assets and Number of ETFs*
Billions of dollars, year-end, 2000–2010

Total net assets of nonregistered ETFs 992

Total net assets of registered ETFs 101
777
75
608
29 531
423 36
15 891
301 703
228 5 580
151 1 496
102 408
66 83 296
226

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Number of ETFs 80 102 113 119 152 204 359 629 728 797 923

* ETF data include ETFs not registered under the Investment Company Act of 1940; ETF data exclude ETFs that invest
primarily in other ETFs.
Note: Components may not add to the total because of rounding.

The vast majority of assets in ETFs are in funds registered with and regulated by the SEC under
the Investment Company Act of 1940 (Figure 3.2). At year-end 2010, about 10 percent of assets
were held in ETFs that invest primarily in commodities, currency, and futures. These ETFs are not
registered with or regulated by the SEC under the Investment Company Act of 1940. Nonregistered
ETFs that invest in commodity futures are regulated by the Commodity Futures Trading Commission
(CFTC), while those that invest solely in physical commodities are regulated by the SEC under the
Securities Act of 1933.

FIGURE 3.2
Legal Structure of ETFs1
Percentage of total net assets, year-end 2010

10% 90%
Nonregistered ETFs2 Registered ETFs

Total: $992 billion

1 ETF data exclude ETFs that invest primarily in other ETFs.

2 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment
Company Act of 1940.

EXCHANGE-TRADED FUNDS 41
Creation of an ETF
An ETF originates with a sponsor, who chooses the investment objective of the ETF. In the case of
an index-based ETF, the sponsor chooses both an index and a method of tracking its target index.
Index-based ETFs track their target index in one of two ways. A replicate index-based ETF holds
every security in the target index and invests its assets proportionately in all the securities in the
target index. A sample index-based ETF does not hold every security in the target index; instead
the sponsor chooses a representative sample of securities in the target index in which to invest.
Representative sampling is a practical solution for an ETF that has a target index with thousands
of securities in it.

The sponsor of an actively managed ETF also determines the investment objective of the fund
and may trade securities at its discretion, much like an actively managed mutual fund. In theory,
an actively managed ETF could trade its portfolio securities regularly. In practice, however, most
existing actively managed ETFs tend to trade only weekly or monthly for a number of reasons,
including minimizing the risk of other market participants front-running their trades.

ETFs are required to publish information about their portfolio holdings daily. Each business day, the
ETF publishes a “creation basket,” a specific list of names and quantities of securities and/or other
assets. The creation basket is either a replicate or a sample of the ETF’s portfolio. Actively managed
ETFs and certain types of index-based ETFs are required to publish their complete portfolio
holdings in addition to their creation basket.

ETF shares are created when an “authorized participant”—typically a large institutional investor,
such as a market maker or specialist—deposits the daily creation basket and/or cash with the ETF
(Figure 3.3). The ETF may require or permit an authorized participant to substitute cash for some
or all of the securities or assets in the creation basket. For instance, if a security in the creation
basket is difficult to obtain or may not be held by certain types of investors (as is the case with
certain foreign securities), the ETF may allow the authorized participant to pay that security’s
portion of the basket in cash. An authorized participant may also be charged a transaction fee
to offset any transaction expenses the fund undertakes. In return for the creation basket and/or
cash, the ETF issues to the authorized participant a “creation unit” that consists of a specified
number of ETF shares. Creation units are large blocks of shares that generally range in size from
25,000 to 200,000 shares. The authorized participant can either keep the ETF shares that make up
the creation unit or sell all or part of them on an exchange. ETF shares are listed on a number of
exchanges where investors can purchase them as they would shares of a publicly traded company.

A creation unit is liquidated when an authorized participant returns the specified number of shares
in the creation unit to the ETF. In return, the authorized participant receives the daily “redemption
basket,” a set of specific securities and/or other assets contained within the ETF’s portfolio. The
composition of the redemption basket typically mirrors that of the creation basket.

42 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 3.3
Creation of an ETF

Creation basket Hold shares

and/or cash

Fund or trust Authorized Investors

participant

One creation unit

(e.g., 50,000 shares of an ETF) Trade on an
exchange

ETFs and Mutual Funds

A registered ETF is similar to a mutual fund in that it offers investors a proportionate share in a
pool of stocks, bonds, and other assets. It is most commonly structured as an open-end investment
company and is governed by the Investment Company Act of 1940 like other mutual funds. For
example, like a mutual fund, an ETF is required to post the mark-to-market net asset value (NAV)
of its portfolio at the end of each trading day. Despite these similarities, key features differentiate
ETFs from mutual funds.

Key Differences
One major difference is that retail investors buy and sell ETF shares on a stock exchange through a
broker-dealer, much like they would any other type of stock. In contrast, mutual fund shares are not
listed on stock exchanges. Rather, retail investors buy and sell mutual fund shares through a variety
of distribution channels, including through a financial adviser, broker-dealer, or directly from a fund
company.

Pricing also differs between mutual funds and ETFs. Mutual funds are “forward priced,” which
means that although investors can place orders to buy or sell shares throughout the day, all orders
placed during the day will receive the same price—the NAV—the next time it is computed. Most
mutual funds calculate their NAV as of 4:00 p.m. eastern time because that is the time U.S. stock
exchanges typically close. In contrast, the price of an ETF share is continuously determined on
a stock exchange. Consequently, the price at which investors buy and sell ETF shares may not
necessarily equal the NAV of the portfolio of securities in the ETF. In addition, two investors selling
the same ETF shares at different times on the same day may receive different prices for their
shares, both of which may differ from the ETF’s NAV.

EXCHANGE-TRADED FUNDS 43
How ETFs Trade
The price of an ETF share on a stock exchange is influenced by the forces of supply and demand.
While imbalances in supply and demand can cause the price of an ETF share to deviate from its
underlying value (i.e., the market value of the underlying instruments, also known as the Intraday
Indicative Value or IIV), substantial deviations tend to be short-lived for many ETFs. Two primary
features of an ETF’s structure promote trading of an ETF’s shares at a price that approximates the
ETF’s underlying value: portfolio transparency and the ability for authorized participants to create
or redeem ETF shares at NAV at the end of each trading day.

The transparency of an ETF’s holdings enables investors to observe discrepancies between the
ETF’s share price and its underlying value during the trading day and to attempt to profit from
them. ETFs contract with third parties (typically market data vendors) to calculate an estimate of
an ETF’s IIV, using the portfolio information an ETF publishes daily. IIVs are disseminated at regular
intervals during the trading day (typically every 15 to 60 seconds). Some market participants for
whom a 15- to 60-second latency is too long will use their own computer programs to estimate the
underlying value of the ETF on a more real-time basis.

If the ETF is trading at a discount to its underlying value, investors may buy ETF shares and/or sell
the underlying securities. The increased demand for the ETF should raise its share price and the
sales of the underlying securities should lower their share prices, narrowing the gap between the
ETF and its underlying value. If the ETF is trading at a premium to its underlying value, investors
may choose to sell the ETF and/or buy the underlying securities. These actions should reduce the
ETF share price and/or raise the price of the underlying securities, bringing the price of the ETF and
the market value of its underlying securities closer together.

The ability of authorized participants to create or redeem ETF shares at the end of each trading
day also helps an ETF trade at market prices that approximate the underlying market value of
the portfolio. When a deviation between an ETF’s market price and its underlying value occurs,
authorized participants may engage in trading strategies similar to those described above, but
will purchase or sell creation units directly with the ETF. For example, when an ETF is trading at a
premium, authorized participants may find it profitable to sell short the ETF during the day while
simultaneously buying the underlying securities. At the end of the day, the authorized participant
will deliver the creation basket of securities to the ETF in exchange for ETF shares that they use
to cover their short sales. When an ETF is trading at a discount, authorized participants may find
it profitable to buy the ETF shares and sell short the underlying securities. At the end of the day,
authorized participants return ETF shares to the fund in exchange for the ETF’s redemption basket
of securities that they use for their short positions. These actions by authorized participants,
commonly described as “arbitrage opportunities,” help keep the market-determined price of an
ETF’s shares close to its underlying value.

44 2011 INVESTMENT COMPANY FACT BOOK

Demand for ETFs
In the past decade, demand for ETFs has accelerated as institutional investors have found ETFs a
convenient vehicle for participating in, or hedging against, broad movements in the stock market.
Demand for ETFs also has been influenced by increased awareness of these investment vehicles
by retail investors and their financial advisers. Assets in ETFs accounted for 8 percent of total net
assets managed by investment companies at year-end 2010. Net issuance of ETF shares in 2010
amounted to $118 billion, about the same pace as in 2009 (Figure 3.4).

FIGURE 3.4
Net Issuance of ETF Shares*
Billions of dollars, 2000–2010

177
151
116 118

74
56 57
43 45
31
16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

* ETF data prior to 2001 were provided by Strategic Insight Simfund; ETF data include ETFs not registered under the
Investment Company Act of 1940. ETF data exclude ETFs that invest primarily in other ETFs.
Sources: Investment Company Institute and Strategic Insight Simfund

EXCHANGE-TRADED FUNDS 45
In 2010, investor demand for broad-based domestic equity ETFs rebounded, and demand for global
and international ETFs remained strong (Figure 3.5). Broad-based domestic equity ETFs saw net
issuance of $28 billion, after net redemptions of $12 billion in 2009. This reversal more than offset a
decline in demand for domestic sector equity ETFs and commodity ETFs in 2010. Demand for bond
and hybrid ETFs slowed as well with net issuance amounting to $30 billion in 2010, down from the
record pace of $46 billion in 2009. Net issuance of global and international equity ETFs remained
strong in 2010 at $42 billion, up from $40 billion in 2009.

FIGURE 3.5
Net Issuance of ETF Shares1 by Investment Classification
Billions of dollars, 2008–2010

2008
2009
2010
88

46
40 42
28 30 25 30 28
23
14 10 11 8

-12
Broad-based Domestic Global/International Bond and Commodities4
domestic equity sector equity2 equity hybrid3

1 ETF data exclude ETFs that invest primarily in other ETFs.

2 Thiscategory includes funds both registered and not registered under the Investment Company Act of 1940.
3 Bond ETFs represented 99.52 percent of flows in the bond and hybrid category in 2010.

4 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment

Company Act of 1940.

As of year-end 2010, large-cap domestic equity ETFs accounted for the largest proportion of all
ETF assets—21 percent, or $212 billion (Figure 3.6). The second-largest category was emerging
market equity ETFs, which accounted for 16 percent ($154 billion) of all ETF assets.

Increased investor demand for ETFs led to a rapid increase in the number of ETFs created by fund
sponsors in the past decade (Figure 3.7). Over the period of 2000 to 2010, 1,055 ETFs were created
with an average of almost 175 ETFs created per year in the past five years. Few ETFs had been
liquidated until 2008 when market pressures appeared to come into play and sponsors began
liquidating ETFs that had failed to gather sufficient assets. Liquidations have tended to occur
among ETFs tracking virtually identical indexes, those focusing on specialty or niche indexes,
or those using alternative weighting methodologies. Despite increasing liquidations over the period
2008 through 2010, the total number of ETFs also increased, on net, by 294 to a total of 923 over
the same time frame.

46 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 3.6
Total Net Assets of ETFs1 Concentrated in Large-Cap Domestic Stocks
Billions of dollars, year-end 2010

212

154
138
104 97 101
50 63
48
26

Large-cap Mid-cap Small-cap Other Domestic Global International3 Emerging Commodities4 Bond
sector markets and
equity2 hybrid5
Broad-based domestic equity Global/International
equity

1 ETF data exclude ETFs that invest primarily in other ETFs.

2 This category includes funds both registered and not registered under the Investment Company Act of 1940.
3 This category includes international, regional, and single country ETFs.

4 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment

Company Act of 1940.

5 Bond ETFs represented 99.77 percent of the assets in the bond and hybrid category.

FIGURE 3.7
Number of ETFs1
2000–2010

Created Liquidated Total at year-end

2000 50 0 80
2001 22 0 102
2002 14 3 113
2003 10 4 119
2004 35 2 152
2005 52 0 204
2006 156 1 359
2007 270 0 629
2008 149 50 728
2009 120 49 7972
2010 177 51 923
1 ETF data include ETFs not registered under the Investment Company Act of 1940. ETF data exclude ETFs that invest
primarily in other ETFs.
2 In 2009, two ETFs converted from holding securities directly to investing primarily in other ETFs.

EXCHANGE-TRADED FUNDS 47
As demand for ETFs has grown, ETF sponsors have offered more funds with a greater variety of
investment objectives. Recently, sponsors have introduced ETFs that invest in particular market
sectors, industries, or commodities. At year-end 2010, there were 248 sector and commodity ETFs
with $205 billion in assets. While commodity ETFs only made up 22 percent of the number of sector
and commodity ETFs (Figure 3.8), they accounted for 49 percent of the total net assets of these
funds (Figure 3.9). Since their introduction in 2004, commodity ETFs have grown from just over
$1 billion to $101 billion by the end of 2010, with total net assets almost tripling in the past two
years. Strong net issuance and surging gold and silver prices were the primary drivers behind the
increase in assets during this time. Approximately three-quarters of commodity ETF assets tracked
the price of gold and silver through the spot and futures markets in 2010.

In 2010, ETF sponsors continued building on recent innovations by launching additional actively
managed ETFs and ETFs that are structured as funds of funds, both of which were first introduced
in 2008. During 2010, seven actively managed ETFs were launched, bringing the total number of
actively managed ETFs to 26* with nearly $3 billion in assets at year-end, excluding ETF funds of
funds. ETF funds of funds are ETFs that hold and invest primarily in shares of other ETFs. At year-
end 2010, there were 27 ETF funds of funds—including three actively managed ETF funds of funds
that launched in 2010—with $1.3 billion in assets.

* This total includes two nonregistered ETFs.

48 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 3.8
Number of Commodity and Sector ETFs1
Percent, year-end 2010

7%
4% Other
Utilities 22%
Commodities2
13%
Technology
10%
7% Consumer
Real estate

12%
16% Financial
Natural resources 8%
Health

Total: 248 funds

1 ETF data exclude ETFs that invest primarily in other ETFs.

2 Thefunds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment
Company Act of 1940.
Note: Components do not add to 100 percent because of rounding.

FIGURE 3.9
Total Net Assets of Commodity and Sector ETFs1
Percent, year-end 2010

4% 9%
Consumer Financial
4%
Health
12%
49% Natural resources
Commodities2
8%
Real estate
7%
Technology
4% 3%
Other Utilities
Total: $205 billion

1 ETF data exclude ETFs that invest primarily in other ETFs.

2 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment
Company Act of 1940.

EXCHANGE-TRADED FUNDS 49
Characteristics of ETF-Owning Households
An estimated 3.3 million U.S. households held ETFs in 2010. Of households that owned mutual
funds, an estimated 5 percent also owned ETFs. ETF-owning households tended to include affluent,
experienced investors who owned a range of equity and fixed-income investments. In 2010,
97 percent of ETF-owning households also owned stocks, either directly or through stock mutual
funds or variable annuities (Figure 3.10). Sixty-six percent of households that owned ETFs also held
bonds, bond mutual funds, or fixed annuities. In addition, 39 percent of ETF-owning households
owned investment real estate.

FIGURE 3.10
ETF-Owning Households Held a Broad Range of Investments
Percentage of ETF-owning households holding each type of investment, May 2010*

Stock mutual funds, stocks, or variable annuities (total) 97

Bond mutual funds, bonds, or fixed annuities (total) 66
Mutual funds (total) 86
Stock mutual funds 76
Bond mutual funds 55
Hybrid mutual funds 57
Money market funds 64
Stocks 88
Bonds 27
Fixed or variable annuities 33
Investment real estate 39

* Multiple responses are included.

Some characteristics of retail ETF owners are similar to those of retail stock owners because a
large number of households that owned ETFs also owned stock. For instance, households that
owned ETFs—like stock-owning households—tended to have household incomes above the national
median and to own at least one defined contribution (DC) retirement plan account (Figure 3.11).
However, ETF-owning households also exhibit some characteristics that distinguish them from
stock-owning households. For example, ETF-owning households tended to have higher incomes,
greater household financial assets, and to be headed by younger and college-educated individuals.

50 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 3.11
Characteristics of ETF-Owning Households
May 2010

Households
All U.S. Households owning individual
households owning ETFs stocks
Median
Age of head of household 49 46 52
Household income1 $49,800 $130,000 $85,000
Household financial assets2 $75,000 $300,000 $225,000

Percentage of households
Household primary or co-decisionmaker for saving and investing:
Married or living with a partner 63 84 76
Widowed 10 3 7
Four-year college degree or more 31 84 50
Employed (full- or part-time) 60 80 67
Retired from lifetime occupation 29 29 33
Household owns:
IRA(s) 41 85 68
DC retirement plan account(s) 52 74 71
1 Total reported is household income before taxes in 2009.
2 Household financial assets include assets in employer-sponsored retirement plans but exclude the household’s primary
residence.

For More Information

»» Frequently Asked Questions About Exchange-Traded Funds
Available at www.ici.org.

EXCHANGE-TRADED FUNDS 51
Over half of closed-end fund total net assets were
in bond funds in 2010

58%
in bond closed-end funds
Chapter Four

Closed-End Funds
Closed-end funds are one of four types of investment companies, along with
mutual (or open-end) funds, exchange-traded funds, and unit investment
trusts. Closed-end funds generally issue a fixed number of shares that are listed
on a stock exchange or traded in the over-the-counter market. The assets of
a closed-end fund are professionally managed in accordance with the fund’s
investment objectives and policies, and may be invested in stocks, bonds,
and other securities.
 This chapter describes recent closed-end fund developments in the United States and provides a profile of
the U.S. households that own them.

What Is a Closed-End Fund?....................................................................................................................................54

Total Net Assets of Closed-End Funds...................................................................................................................54
Number of Closed-End Funds..................................................................................................................................56
Closed-End Fund Preferred Shares.........................................................................................................................57
Closed-End Fund Auction Market Preferred Stock...............................................................................................57
Redemption and Replacement of AMPS..........................................................................................................59
MuniFund Term Preferred Shares and Puttable Preferred Stock..................................................................59
Characteristics of Households Owning Closed-End Funds..................................................................................60

What Is a Closed-End Fund?

A closed-end fund is a type of investment company whose shares are listed on a stock exchange or
traded in the over-the-counter market. The assets of a closed-end fund are professionally managed
in accordance with the fund’s investment objectives and policies, and may be invested in stocks,
bonds, and other securities. The market price of closed-end fund shares fluctuates like that of other
publicly traded securities and is determined by supply and demand in the marketplace.

Closed-end funds offer a fixed number of shares to investors during an initial public offering.
Closed-end funds also may make subsequent public offerings of shares in order to raise additional
capital. Once issued, the shares of a closed-end fund are not typically purchased or redeemed
directly by the fund. Rather, they are bought and sold by investors in the open market.

Because a closed-end fund does not need to maintain cash reserves or sell securities to meet
redemptions, the fund has the flexibility to invest in less liquid portfolio securities. For example,
a closed-end fund may invest in securities of very small companies, municipal bonds that are not
widely traded, or securities traded in countries that do not have fully developed securities markets.
Closed-end funds also have flexibility to borrow against their assets, allowing them to use leverage
as part of their investment strategy.

Total Net Assets of Closed-End Funds

Total net assets of closed-end funds increased to $241 billion at year-end 2010, up 7 percent from
year-end 2009 but still below the recent high of $313 billion in assets at year-end 2007 (Figure 4.1).
Closed-end fund assets have increased by $98 billion, on net, over the past decade.

54 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 4.1
Closed-End Fund Total Net Assets Increased to $241 Billion
Billions of dollars, year-end, 2000–2010

Equity funds
Bond funds

298 313
277
254 241
214 146 225
106 122
82 186
159 53 90 101
143 141
34 74
37 31
161 172 171 176 167
125 135 140
107 110 112

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Note: Components may not add to the total because of rounding.

Historically, bond funds have accounted for a large share of assets in closed-end funds. In 2000,
74 percent of all closed-end fund assets were held in bond funds, while the remainder was held in
equity funds. At year-end 2010, assets in bond closed-end funds were $140 billion, or 58 percent of
closed-end fund assets (Figure 4.2). Equity closed-end funds totaled $101 billion, or 42 percent of
closed-end fund assets. These relative shares have shifted over time, in part because issuance by
equity closed-end funds exceeded that of bond closed-end funds for every year from 2004 through
2008 (Figure 4.3).

FIGURE 4.2
Bond Funds Were the Largest Segment of the Closed-End Fund Market
Percentage of closed-end fund total net assets, year-end 2010

25%
Domestic equity
6%
Global/International bond
17%
Global/International equity

32%
Domestic municipal bond
20%
Domestic taxable bond
Total closed-end fund assets: $241 billion

CLOSED-END FUNDS 55
Proceeds from issuance of closed-end funds totaled $8.3 billion in 2010, up from $3.9 billion in the
previous year (Figure 4.3). In 2010, issuance of closed-end bond funds totaled $4.6 billion, of which
$4.3 billion—or about half of total issuance—was domestic bond funds. The remaining $3.6 billion
in proceeds was from issuance of closed-end equity funds. Virtually all equity closed-end fund
issuance in 2010 was from domestic equity closed-end funds, in contrast to 2009 in which equity
fund proceeds were primarily global and international equity closed-end funds.

For more data on closed-end funds, see section 2 in the data tables on pages 138–139.

FIGURE 4.3
Closed-End Fund Share Issuance
Proceeds from the issuance of initial and additional public offerings of closed-end fund shares, millions
of dollars, 2002–2010*

Equity Bond

Global/ Global/
Total Domestic International Domestic International
2002 $24,911 $9,191 $18 $15,701 $0
2003 40,963 11,187 161 28,582 1,032
2004 27,867 15,424 5,801 5,613 1,028
2005 21,266 12,559 6,628 1,955 124
2006 12,333 7,692 2,583 1,724 334
2007 31,193 5,973 19,871 2,654 2,695
2008 330 8 200 121 0
2009 3,900 476 1,176 1,931 317
2010 8,291 3,628 13 4,291 358

* Data are not available for years prior to 2002.

Note: Components may not add to the total because of rounding.

Number of Closed-End Funds

The number of closed-end funds available to investors has increased over the past decade. At
the end of 2010, there were 624 closed-end funds, up from 482 at the end of 2000, but still down
from 664 at the end of 2007 (Figure 4.4). Bond funds were the most common type of closed-end
fund, accounting for 67 percent of the total number of funds. Municipal bond funds represented
41 percent of all closed-end funds in 2010. Equity funds made up 33 percent of the total number
of closed-end funds.

56 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 4.4
Number of Closed-End Funds
Year-end, 2000–2010

Equity funds
Bond funds
635 647 664 643
619 628 624
584
545
482 492 158 193 204 230 222 209 204
131
123
123 116

453 461 442 443 421

376 422 434 419 420
359

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Closed-End Fund Preferred Shares

Closed-end funds are permitted to issue one class of preferred shares in addition to common
shares. Preferred shares differ from common shares in that preferred shareholders are paid
dividends but do not share in the gains and losses of the fund. Issuing preferred shares allows
a closed-end fund to raise additional capital, which it can use to purchase more securities for
its portfolio. This strategy, known as leveraging, is intended to allow the fund to produce higher
returns for its common shareholders. At year-end 2010, 13 percent of the $241 billion in closed-end
fund assets were preferred shares (Figure 4.5). Bond closed-end funds accounted for more than
three-quarters of outstanding preferred share assets.

Closed-End Fund Auction Market Preferred Stock

In the early 1990s, closed-end funds began issuing a type of preferred share referred to as auction
market preferred stock (AMPS). AMPS are structured to pay dividends at rates set through auctions
run by an independent auction agent. Typically, shares traded hands and dividend rates were reset
through auctions that were held every seven or 28 days. Investors submitted bids and sell orders
through a broker-dealer, who, in turn, submitted them to an auction agent. Bids were filled to the
extent shares were available, and sell orders were filled to the extent there were bids. All filled bids
received dividends at the new set dividend, or market clearing, rate.

CLOSED-END FUNDS 57
 FIGURE 4.5
Bulk of Closed-End Fund Total Net Assets Was in Common Share Classes
Billions of dollars, year-end, 2000–2010

Common1
Preferred2
313
298
277
254 241
214 225
186
159 217 238 253
143 141 195
165 191 209
123 147
118 113

36 49 59 60 60 60 39 34 32
25 28
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 All closed-end funds issue common stock, which is also known as common shares.
2 A closed-end fund may issue preferred shares to raise additional capital, which can be used to purchase more securities for
its portfolio. Preferred stock differs from common stock in that preferred shareholders are paid dividends but do not share in
the gains and losses of the fund.
Note: Components may not add to the total because of rounding.

Since mid-February 2008, all auctions for closed-end fund AMPS have failed. The failed auctions
have not been caused by defaults under the terms of the AMPS or credit quality concerns with fund
investments; they failed because there were more shares offered for sale in the auction than there
were bids to buy shares. Prior to the failures, if more shares were tendered for sale than purchased,
broker-dealers typically would enter the auction and purchase any excess shares to prevent the
auction from failing. However, broker-dealers are not, and never have been, legally required to bid
for their own accounts in an auction.

As a result of a series of pressures on their balance sheets, broker-dealers stopped participating

in the auctions. After a few auctions failed, all subsequent auctions for closed-end fund preferred
stock failed. Preferred shareholders appeared to become concerned about the liquidity of their
AMPS, and many sought to sell their shares. This move by preferred shareholders increased the
imbalance between supply and demand, making it difficult for the auction market to resume
functioning.

58 2011 INVESTMENT COMPANY FACT BOOK

Redemption and Replacement of AMPS
As of year-end 2010, closed-end funds had redeemed, or announced plans to redeem,
approximately $43 billion, or 67 percent, of the $64 billion in AMPS that were outstanding in mid-
February 2008 (Figure 4.6). Closed-end funds have, among other things, obtained bank loans and
lines of credit, issued tender option bonds, engaged in reverse repurchase agreements, and issued
extendable notes to replace AMPS while maintaining leverage. Taxable bond closed-end funds have
redeemed or announced redemptions for 85 percent of their original outstanding AMPS. Because
tax-exempt bond closed-end funds (also known as municipal bond funds) have fewer options for
alternative leverage than taxable funds do, they have redeemed, or announced redemptions for,
a smaller amount (47 percent of the original AMPS outstanding). A number of these funds have
issued MuniFund Term Preferred (MTP) shares and have privately placed Variable Rate Demand
Preferred (VRDP) shares to redeem AMPS while maintaining leverage.

FIGURE 4.6
Closed-End Fund AMPS Redemptions
Billions of dollars, year-end 2010

Still outstanding
Redeemed or pending
33
31
5

16

28

15

Taxable bond closed-end Municipal bond closed-end

fund–issued AMPS fund–issued AMPS

Source: Thomas J. Herzfeld Advisors, Inc.

MuniFund Term Preferred Shares and Puttable Preferred Stock

A number of municipal bond closed-end funds issued—or announced their intention to issue—
MTP shares beginning in October 2009. MTP shares are exchange-listed closed-end fund preferred
shares that have a fixed dividend rate set at the time of issuance. MTP shares have a mandatory
redemption period (typically five years) unless they are redeemed or repurchased earlier by the
fund. Unlike fixed-rate preferred stock previously issued, MTP shares were created for issuance by
closed-end funds investing in municipal bonds.

CLOSED-END FUNDS 59
Further, VRDP shares—a type of puttable preferred stock—were privately placed for a few
municipal bond closed-end funds beginning in August 2008. These issuances continued throughout
2010. They are similar to AMPS in that they pay dividends at variable rates, and sell orders are filled
to the extent there are bids. Unlike AMPS, however, rates are set through remarketings (rather than
through auctions); and if there are more sell orders than bids, a third party, commonly referred to
as a liquidity provider, purchases the VRDP shares. Dividends are set weekly at a rate established
by the remarketing agent subject to a maximum rate, which will increase over time in the event of
an extended period of unsuccessful remarketing. Closed-end funds are required to redeem VRDP
shares still owned by the liquidity provider if there are six months of continuous, unsuccessful
remarketing.

Characteristics of Households Owning Closed-End Funds

An estimated 2.1 million U.S. households held closed-end funds in 2010. These households
tended to include affluent, experienced investors who owned a range of equity and fixed-income
investments. In 2010, 95 percent of closed-end fund–owning households also owned stocks, either
directly or through stock mutual funds or variable annuities (Figure 4.7). Seventy-nine percent of
households that owned closed-end funds also held bonds, bond mutual funds, or fixed annuities. In
addition, 52 percent of these households owned investment real estate. Because a large number of
households that owned closed-end funds also owned stocks and mutual funds, the characteristics
of closed-end fund–owning households were similar in many respects to those of stock- and
mutual fund–owning households. For instance, households that owned closed-end funds—like
stock- and mutual fund–owning households—tended to be headed by college-educated individuals
and had household incomes above the national average (Figure 4.8).

FIGURE 4.7
Closed-End Fund–Owning Households Held a Broad Range of Investments
Percentage of closed-end fund–owning households holding each type of investment, May 2010*

Stock mutual funds, stocks, or variable annuities (total) 95

Bond mutual funds, bonds, or fixed annuities (total) 79
Mutual funds (total) 87
Stock mutual funds 80
Bond mutual funds 61
Hybrid mutual funds 65
Money market funds 68
Stocks 82
Bonds 43
Fixed or variable annuities 51
Investment real estate 52

* Multiple responses are included.

60 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 4.8
Closed-End Fund–Owning Households Had Above-Average Household Incomes and
Financial Assets
May 2010

Households Households Households

owning owning owning
All U.S. closed-end mutual individual
households funds funds stocks
Median
Age of head of household 49 54 50 52
Household income1 $49,800 $87,500 $80,000 $85,000
Household financial assets2 $75,000 $500,000 $200,000 $225,000

Percentage of households
Household primary or co-decisionmaker for saving and investing:
Married or living with a partner 63 70 75 76
Widowed 10 13 6 7
Four-year college degree or more 31 63 46 50
Employed (full- or part-time) 60 63 73 67
Retired from lifetime occupation 29 55 25 33
Household owns:
IRA(s) 41 75 68 68
DC retirement plan account(s) 52 65 77 71
1 Total reported is household income before taxes in 2009.
2 Household financial assets include assets in employer-sponsored retirement plans but exclude the household’s primary
residence.

Nonetheless, households that owned closed-end funds exhibit certain characteristics that
distinguish them from stock- and mutual fund–owning households. For example, households with
closed-end funds tended to have much greater household financial assets than either stock or
mutual fund investors. Closed-end fund investors were also more likely to be retired from their
lifetime occupations than either stock or mutual fund investors.

For More Information

»»“The Closed-End Fund Market, 2010,” ICI Research Perspective
»» Frequently Asked Questions About Closed-End Funds and Their Use of Leverage
Available at www.ici.org.

CLOSED-END FUNDS 61
Fees and expenses of stock funds dropped by more
than half since 1990

0.95%
average fees and expenses in 2010
Chapter Five

Mutual Fund Fees and Expenses

Mutual fund investing involves two primary types of fees and expenses: sales
loads and ongoing expenses. Sales loads are one-time fees—paid directly by
investors either at the time of share purchase (front-end loads) or, in some
cases, when shares are redeemed (back-end loads). Unlike sales loads, ongoing
expenses are paid from fund assets, and thus investors pay them indirectly.
A fund’s expense ratio is its annual ongoing expenses expressed as a
percentage of fund assets. Ongoing fund expenses cover portfolio
management, fund administration, daily fund accounting and pricing,
shareholder services (such as call centers and websites), distribution charges
known as 12b-1 fees, and other miscellaneous costs of operating the fund.
 Mutual fund investors, like investors in all financial products, pay for services they receive. This chapter
provides an overview of mutual fund fees and expenses.

Trends in Mutual Fund Fees and Expenses............................................................................................................64

Shareholder Demand for Lower-Cost Funds..........................................................................................................66
Factors Influencing Mutual Fund Expenses...........................................................................................................68
The Changing Distribution Structure of Mutual Funds.........................................................................................73

Trends in Mutual Fund Fees and Expenses

To understand trends in mutual fund fees and expenses, it is helpful to combine major fund fees
and expenses into a single measure. ICI created such a measure by adding a fund’s annual expense
ratio to an estimate of the annualized cost that investors pay for one-time sales loads. This measure
is reported as an asset-weighted average, which gives more weight to those funds that have the
most assets.

Mutual fund fees and expenses that investors pay have trended downward since 1990. In 1990,
investors in stock funds, on average, paid fees and expenses of 2.00 percent of fund assets.
By 2010, that figure had fallen by more than 50 percent to 0.95 percent (Figure 5.1). Fees and

FIGURE 5.1
Fees and Expenses Incurred by Stock and Bond Mutual Fund Investors Have Declined
by More Than Half Since 1990
Percent, selected years

Stock funds1, 2
2.00
1.56
1.28 1.24 1.23 1.22 1.16 1.09 1.04 1.01 0.97 0.98 0.95

1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Bond funds1
1.85
1.41
1.00 0.96 0.94 0.94 0.91 0.84 0.81 0.76 0.72 0.73 0.72

1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in other
mutual funds. Figure reports year-end asset-weighted average of annual expense ratios and annualized loads for individual
funds.
2 Stock funds include equity and hybrid funds.

Sources: Investment Company Institute and Lipper

64 2011 INVESTMENT COMPANY FACT BOOK

expenses paid on bond funds declined by 61 percent from 1.85 percent of fund assets to
0.72 percent over the same time period.

There are a number of reasons for the dramatic drop in fees and expenses incurred by mutual
fund investors. First, investors generally pay much less in sales loads than they did in 1990.
Maximum front-end loads that an investor might pay for investing in mutual funds have remained
fairly stable since 1990 (Figure 5.2). However, the front-end loads that shareholders actually
incurred—sometimes referred to as the effective load—have fallen significantly. For stock
funds, for example, the average front-end sales load actually paid fell from 3.9 percent in 1990
to 1.0 percent in 2010. A key factor contributing to the steep decline in loads paid has been the
growth of mutual fund sales through employer-sponsored retirement plans. Load funds often
waive loads for purchases of fund shares through such retirement plans.

FIGURE 5.2
Front-End Sales Loads That Investors Paid Were Well Below Maximum Front-End Sales
Loads That Funds Charged
Percentage of purchase amount, selected years

Maximum front-end Front-end sales load that

sales load 1 investors actually incurred 1
Stock 2 Bond Stock 2 Bond
1990 5.0 4.6 3.9 3.5
1995 4.8 4.1 2.5 2.1
2000 5.2 4.2 1.4 1.1
2001 5.2 4.2 1.2 1.0
2002 5.3 4.1 1.3 1.0
2003 5.3 4.1 1.3 1.0
2004 5.3 4.1 1.4 1.1
2005 5.3 4.0 1.3 1.0
2006 5.3 4.0 1.2 0.9
2007 5.3 4.0 1.2 0.9
2008 5.3 4.0 1.1 0.8
2009 5.3 3.9 1.0 0.8
2010 5.3 3.9 1.0 0.8
1 The maximum front-end sales load is a simple average of the highest front-end sales load that funds may charge as set forth
in their prospectuses. The average actually incurred is the maximum sales load multiplied by the ratio of total front-end sales
loads collected by front-end load funds as a percentage of new sales of shares by such funds.
2 Stock funds include equity and hybrid funds.

Note: Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily
in other mutual funds.
Sources: Investment Company Institute, Lipper, and Strategic Insight Simfund

MUTUAL FUND FEES AND EXPENSES 65

Another reason for the decline in the fees and expenses of investing in mutual funds has been
growth in the sales of no-load funds. Much of the increase in sales of no-load funds has occurred
through the employer-sponsored retirement plan market. In addition, sales of no-load funds have
also expanded through mutual fund supermarkets, discount brokers, and full-service brokerage
platforms that compensate financial advisers with asset-based fees paid outside of funds.

Finally, mutual fund fees have been pushed down by economies of scale and competition within
the mutual fund industry. The demand for mutual fund services has increased dramatically over
the past several decades. For example, the number of households owning mutual funds has more
than doubled since 1990, going from 23.4 million in 1990 to 51.6 million in 2010. Over the same
period, the number of shareholder accounts rose from 61.9 million to over 290 million. Ordinarily,
such a sharp increase in demand could tend to raise fund expense ratios. Any such effect, however,
was more than offset by the downward pressure on fund expense ratios from competition among
existing fund sponsors, the entry of new fund sponsors into the industry, economies of scale
resulting from the growth in fund assets, and shareholder movement to lower-cost funds.

Shareholder Demand for Lower-Cost Funds

ICI research indicates that mutual fund shareholders invest predominantly in lower expense ratio
funds. This can be seen by comparing the average expense ratio on mutual funds offered in the
marketplace with the average expense ratio actually paid by mutual fund shareholders (Figure 5.3).

FIGURE 5.3
Fund Shareholders Paid Lower-Than-Average Expenses in Stock Funds1, 2
Percent, 1996–2010

Simple average expense ratio for stock funds

Average expense ratio paid by shareholders3

1.55 1.55 1.58 1.58 1.63 1.65 1.66 1.58

1.54 1.52 1.50 1.45 1.45 1.48 1.45

1.03 0.98 0.95 0.97 0.98 0.98 0.99 0.99 0.94 0.90 0.87
0.85 0.82 0.86 0.84

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in other
mutual funds.
2 Stock funds include equity and hybrid funds.

3 Figure reports year-end asset-weighted average of annual expense ratios for individual funds.

Sources: Investment Company Institute and Lipper

66 2011 INVESTMENT COMPANY FACT BOOK

The simple average expense ratio of stock funds (which measures the average expense ratio of all
stock funds offered in the market) was 1.45 percent in 2010. The average expense ratio that stock
fund shareholders actually paid (the asset-weighted average expense ratio across all stock funds)
was considerably lower: just 0.84 percent of stock fund assets.

Another way to illustrate that investors demand mutual funds with lower expense ratios is to
identify how investors allocate their new purchases of mutual fund shares. During the 11-year
period 2000 to 2010, stock funds with expense ratios in the lowest quartile received 82 percent of
all net new cash flow, while the remaining 75 percent of funds received only 18 percent of the net
new cash (Figure 5.4). This pattern holds for actively managed stock funds, stock index funds, and
target date funds (funds that adjust their portfolios, typically more toward fixed income, as the
fund approaches and passes the fund’s “target date”). Stock index funds with expense ratios in the
lowest quartile garnered 86 percent of the net new cash flow over the 11 years. Since 2005, target
date funds with expense ratios in the lowest quartile have received 83 percent of the new net cash
to such funds.

FIGURE 5.4
Least Costly Stock Funds Attract Most of the Net New Cash
Percent, 2000–2010

Percentage of net flows to funds with expense ratios above the 25th percentile
Percentage of net flows to funds with expense ratios below the 25th percentile

86 83
82
74

26
18 14 17

All stock funds1, 2 Actively managed Stock index funds1, 2 Target date funds3
stock funds1, 2

1 Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in other
mutual funds.
2 Stock funds include equity and hybrid funds.

3 Target date fund data are for 2005–2010; includes target date funds that invest primarily in other mutual funds.

Sources: Investment Company Institute and Lipper

MUTUAL FUND FEES AND EXPENSES 67

Factors Influencing Mutual Fund Expenses
The prices of most goods and services differ considerably across the array of available products.
Mutual funds are no exception: expense ratios vary across the range of mutual funds (Figure 5.5).
The level of fund expenses depends on the fund investment objective, fund assets, balances in
shareholder accounts, payments to intermediaries, and other factors.

Fund Investment Objective

Expenses vary by type of fund; for example, bond and money market funds tend to have lower
expense ratios than equity funds. Among equity funds, expense ratios tend to be higher among
funds that specialize in particular sectors—“sector” funds, such as healthcare or real estate—or
those that invest in international stocks, because such funds tend to be more costly to manage.

Even within a particular type of investment objective, there can be considerable variation in fund
expense ratios. For example, 10 percent of aggressive growth equity funds have expense ratios of
0.89 percent or less, while 10 percent have expense ratios of 2.27 percent or more. Among other

FIGURE 5.5
Expense Ratios for Selected Investment Objectives*
Percent, 2010

Average
Investment 10th 90th Asset- Average
objective percentile Median percentile weighted Simple
Equity funds 0.80 1.40 2.25 0.84 1.47
Aggressive growth 0.89 1.45 2.27 0.99 1.54
Growth 0.76 1.29 2.15 0.89 1.39
Sector funds 0.93 1.56 2.43 0.98 1.65
Growth and income 0.55 1.18 2.00 0.54 1.25
Income equity 0.73 1.20 1.94 0.83 1.27
International equity 0.95 1.53 2.38 0.99 1.61
Hybrid funds 0.62 1.21 2.00 0.83 1.27
Bond funds 0.50 0.92 1.70 0.64 1.04
Taxable bond 0.49 0.95 1.78 0.65 1.06
Municipal bond 0.53 0.87 1.60 0.62 1.02
Money market funds 0.16 0.29 0.52 0.26 0.32

* Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in
other mutual funds.
Sources: Investment Company Institute and Lipper

68 2011 INVESTMENT COMPANY FACT BOOK

things, such variation reflects the fact that some aggressive growth funds focus more on small-
or mid-cap stocks while others focus more on large-cap stocks. This can be significant because
portfolios of small- and mid-cap stocks tend to be more costly to manage.

Fund and Average Fund Account Size

Other factors—such as fund size and average fund account size—also help explain differences in
fund expense ratios. These two factors vary widely across the industry. In 2010, the median long-
term mutual fund had assets of $264 million (Figure 5.6). Twenty-five percent of all long-term
funds had assets of $70 million or less, while another 25 percent of long-term funds had assets
greater than $929 million. Average fund account balances show similar variation. In 2010,
50 percent of long-term funds had average account balances of $49,052 or less. Twenty-five
percent of long-term funds had average account balances of $19,307 or less. At the other extreme,
25 percent of long-term funds had average account balances of more than $162,094.

All else equal, larger mutual funds tend to have lower-than-average expense ratios because of
economies of scale. Funds with higher account balances also tend to have lower expense ratios than
other funds. This reflects the fact that each account, regardless of its size, requires certain services
(such as mailing periodic account statements to account holders). Funds that cater primarily to
institutional investors—who typically invest large amounts of money—tend to have higher average
account balances. Funds that primarily serve retail investors typically have lower average account
balances.

FIGURE 5.6
Fund Sizes and Average Account Balances Varied Widely
Long-term funds, year-end 2010 1, 2

Fund assets Average account balance 3

Millions of dollars Dollars
10th percentile $21 $10,461
25th percentile 70 19,307
Median 264 49,052
75th percentile 929 162,094
90th percentile 2,703 1,245,613
1 Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in
other mutual funds.
2 Long-term funds include equity, hybrid, and bond funds.

3 Average account balance is calculated at the fund level as total fund assets divided by the total number of shareholder

accounts, which includes a mix of individual and omnibus accounts.

MUTUAL FUND FEES AND EXPENSES 69

 A Look at the Fees and Expenses of S&P 500 Index Mutual Funds
All S&P 500 index funds share the goal of mirroring the return on the S&P 500, a well-known
index of 500 large-cap U.S. stocks. As a result, S&P 500 index funds all hold essentially
identical portfolios.

Nevertheless, S&P 500 index funds differ from one another in important ways. Some S&P
500 index funds are very large—among the largest of any mutual funds—while other S&P
500 index funds are quite small. Required minimum investments range widely for S&P 500
index funds, from $100 for some retail funds to more than $25 million among S&P 500 index
funds that cater to institutions. S&P 500 index funds also differ in terms of certain fees that
investors may pay out of pocket, such as account maintenance fees. Finally, some S&P 500
index funds are sold through intermediaries (load funds), while others can be purchased
directly from fund companies (no-load funds).

FIGURE 5.7
Investor Assets Were Concentrated in S&P 500 Index Mutual Funds with the
Lowest Expense Ratios
Percentage of total net assets of S&P 500 index mutual funds, year-end 2010

63

23
15

0.10 or less 0.11 to 0.20 More than 0.20

Total expense ratio*

* The total expense ratio, which is reported as a percentage of fund assets, includes fund operating expenses and
12b-1 fees.
Note: Components do not add to 100 percent because of rounding. Data exclude mutual funds available as
investment choices in variable annuities.
Sources: Investment Company Institute and Lipper

70 2011 INVESTMENT COMPANY FACT BOOK

 Because S&P 500 index funds are not all identical, their expense ratios differ. Similar to all
long-term mutual funds, larger S&P 500 index funds and those S&P 500 index funds with
higher average account balances tend to have lower-than-average expense ratios because
of economies of scale. S&P 500 index funds sold through intermediaries tend to have higher
expense ratios than comparable no-load S&P 500 index funds in order to compensate
financial advisers for the planning, advice, and ongoing service that they provide to clients.
Retail investors who purchase no-load S&P 500 index funds either do not use a financial
adviser or use a financial adviser but pay the adviser directly.

Investors favor the least costly S&P 500 index funds. For example, in 2010, over 60 percent
of the assets in S&P 500 index funds were held in funds with expense ratios of 0.10 percent
or less (Figure 5.7). Lower-cost funds have garnered the bulk of investors’ net new purchases
of shares of S&P 500 index funds. From 1996 to 2010, 81 percent of the total net new cash
flow to S&P 500 index funds went to those funds with expense ratios of 0.20 percent or less
(Figure 5.8).

FIGURE 5.8
Investors’ Net Purchases of S&P 500 Index Mutual Funds Were Concentrated in
Least Costly Funds
Percentage of net new cash flow of S&P 500 index mutual funds, 1996–2010

43
38

19

0.10 or less 0.11 to 0.20 More than 0.20

Total expense ratio*

*The total expense ratio, which is reported as a percentage of fund assets, includes fund operating expenses and
12b-1 fees.
Note: Data exclude mutual funds available as investment choices in variable annuities.
Sources: Investment Company Institute and Lipper

MUTUAL FUND FEES AND EXPENSES 71

Because larger funds typically have lower expense ratios, the expense ratios of individual funds
often fall as those funds grow. This is illustrated in Figure 5.9, which tracks the expense ratios of
domestic equity funds continuously in existence since 1991, along with the growth in their assets.
Generally, the expense ratios of these funds declined as their total net assets rose, and vice versa.
For example, from 1991 to 2010, the average expense ratio of this group of funds fell 13 percent,
reflecting trend growth in their assets. On the other hand, when the assets of these funds declined
during the bear markets that began in 2000 and 2007, their average expense ratio rose.

Payments to Intermediaries
Another factor that helps explain variation in fund fees is whether funds are sold through
intermediaries, such as brokers or registered financial advisers. These professionals help investors
define their investment goals, select appropriate funds, and provide ongoing advice and service.
Financial advisers can be compensated for these services through a particular kind of fund fee,
known as a 12b-1 fee, which is included in a fund’s expense ratio. As a result, funds sold through
intermediaries tend to have higher expense ratios than other funds (no-load funds). No-load
funds are sold directly to investors or are sold to investors through financial advisers who charge
investors separately for investment advice. Thus, no-load funds tend to have lower expense ratios
than other funds with similar investment objectives.

FIGURE 5.9
Fund Expense Ratios Tend to Fall as Fund Total Net Assets Rise
Share classes of domestic equity funds continuously in existence since 1991 1

Percent Billions of dollars

1.00 Total net assets 1,800
1,592 1,628
1,504 1,451 1,600
0.95 1,407 1,392
1,400
1,223 1,209 1,228
0.90 1,115 1,152 1,200
Average expense ratio2 1,004 931 912 1,000
0.85 766
800
602
0.80 600
384 412
291 400
0.75 228
200

0.70 0
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

1 Calculations are based on a fixed sample of share classes. Sample includes all domestic equity share classes continuously in
existence since 1991, excluding mutual funds available as investment choices in variable annuities and mutual funds that
invest primarily in other mutual funds.
2 Average expense ratio is an asset-weighted average.

Sources: Investment Company Institute and Lipper

72 2011 INVESTMENT COMPANY FACT BOOK

The Changing Distribution Structure of Mutual Funds
Many mutual fund investors pay for the services of a professional financial adviser. ICI research
finds that among investors owning mutual fund shares outside of retirement plans at work,
81 percent own fund shares through professional financial advisers. Financial advisers typically
devote time and attention to prospective investors before investors make an initial purchase of
funds and other securities. The adviser generally meets with the investor, identifies financial goals,
analyzes existing financial portfolios, determines an appropriate asset allocation, and recommends
funds to help achieve the investor’s goals. Advisers also provide ongoing services, such as
periodically reviewing investors’ portfolios, adjusting asset allocations, and responding to
customer inquiries.

Thirty years ago, fund shareholders usually compensated financial advisers for their assistance
through a front-end load—a one-time, upfront payment for current and future services. After 1980,
when the U.S. Securities and Exchange Commission (SEC) adopted Rule 12b-1 under the Investment
Company Act of 1940, funds and their shareholders had greater flexibility in compensating financial
advisers. Rule 12b-1 and subsequent regulatory action established a framework under which
investors can pay indirectly for some or all of the services they receive from financial advisers
through 12b-1 fees—asset-based fees that are included in a fund’s expense ratio.

Under this framework, 12b-1 fees can also be used to compensate financial intermediaries, such
as retirement plan recordkeepers and discount brokerage firms, for the services they provide to
fund shareholders. Although they can be used to pay for advertising and marketing, 12b-1 fees
are primarily used to compensate financial advisers and other financial intermediaries for assisting
fund investors before (40 percent of fees collected) and after they purchase fund shares
(52 percent of fees collected) (Figure 5.10).

FIGURE 5.10
Most 12b-1 Fees Used to Pay for Shareholder Services
Percentage of 12b-1 fees collected, 2004

6% 2%
Payments to fund underwriters Advertising and promotion

40%
52%
Compensation to financial advisers
Ongoing shareholder services
for initial assistance

Source: ICI Fundamentals, “How Mutual Funds Use 12b-1 Fees”

MUTUAL FUND FEES AND EXPENSES 73

 Mutual Fund Share Classes
Mutual funds are often classified according to the class of shares that fund sponsors offer
to investors, primarily load or no-load classes. Load classes generally serve investors who
own fund shares purchased through financial advisers; no-load fund classes usually serve
investors who purchase shares without the assistance of a financial adviser or choose to
compensate the financial adviser separately. About two-thirds of all mutual funds offer two
or more share classes. Funds that sell through financial advisers typically offer more than
one share class to provide investors with alternative ways to pay for the services of financial
advisers.

Load Share Classes

Load share classes—front-end load, back-end load, and level-load shares—usually include
a sales load or a 12b-1 fee or both. The sales load and 12b-1 fees are used to compensate
financial advisers and other investment professionals for their services.

Front-end load shares, which are predominantly Class A shares, represent the traditional
means of paying for securities-related assistance. Front-end load shares generally charge a
sales load at the time of purchase, which is a percentage of the sales price or offering price.
Front-end load shares also often have a 12b-1 fee of 0.25 percent. Front-end load shares are
sometimes used in employer-sponsored retirement plans, but fund sponsors typically waive
the sales load for purchases made through such retirement plans.

Back-end load shares, which are primarily Class B shares, typically do not have a front-end
load. Investors using back-end load shares pay for services provided by financial advisers
through a combination of an annual 12b-1 fee and a contingent deferred sales load (CDSL).
The CDSL is paid if fund shares are redeemed before a given number of years of ownership.
The CDSL decreases the longer the investor owns the shares and reaches zero typically after
the shares have been held six or seven years. After six to eight years, back-end load shares
usually convert to a share class with a lower 12b-1 fee. For example, Class B shares typically
convert to Class A shares after a specified number of years.

Level-load shares, which include Class C shares, generally do not have a front-end load.
Investors in this kind of share class compensate financial advisers with a combination of an
annual 12b-1 fee (typically 1 percent) and a CDSL (also often 1 percent) that shareholders pay
if they sell their shares within the first year after purchase.

74 2011 INVESTMENT COMPANY FACT BOOK

 No-Load Share Classes
No-load share classes have no front-end load or CDSL, and have a 12b-1 fee of 0.25 percent
or less. Originally, no-load share classes were offered by mutual fund sponsors that sold
directly to investors. Now, investors can purchase no-load funds through employer-
sponsored retirement plans, mutual fund supermarkets, discount brokerage firms, and bank
trust departments, as well as directly from mutual fund sponsors. Some financial advisers
who charge investors separately for their services rather than through a load or 12b-1 fee use
no-load share classes.

The introduction of Rule 12b-1 changed the means by which financial advisers were compensated.
The maximum front-end load fees that funds might charge declined sharply in the 1980s as funds
adopted 12b-1 fees as an alternative way to compensate financial advisers and intermediaries for
providing services to fund shareholders. Since 1990, 12b-1 fees paid by shareholders rose from
$1.1 billion to $10.6 billion (Figure 5.11). This increase reflects, in part, the roughly tenfold increase
in mutual fund assets and the more than twofold increase in the number of households owning
funds since 1990.

FIGURE 5.11
12b-1 Fees Paid Reflect Asset Growth and Shift in Source of Financial Advisers’
Compensation
Billions of dollars, selected years1

No-load funds2
Load funds
13.1
12.3
11.0 11.6
10.2 10.7 10.6
9.8 9.7
8.9 9.0

3.6
1.1

1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 Data exclude mutual funds available as investment choices in variable annuities and mutual funds that invest primarily in other
mutual funds.
2 Front-end load = 0 percent, CDSL = 0 percent, and 12b-1 fee ≤ 0.25 percent.

Sources: Investment Company Institute and Lipper

MUTUAL FUND FEES AND EXPENSES 75

In recent years, the system for compensating financial intermediaries for distributing mutual fund
shares and assisting investors has continued to evolve. For example, maximum front-end load
fees have stabilized, but front-end load fee payments (as a percentage of assets) have continued
to decline. This, in large measure, reflects the discounts from the maximum front-end load that
investors often receive when making large share purchases or purchases through 401(k) plans.

There has also been a shift by investors toward no-load share classes. No-load share classes have
consistently attracted more net new cash than load share classes in recent years (Figure 5.12). In
2010, for example, no-load share classes of long-term funds garnered $253 billion in net new cash,
compared to an outflow of $33 billion for load share classes. Cumulatively, these flows have led to
a concentration of long-term fund assets in no-load share classes; by 2010, no-load share classes
of long-term funds had $5.1 trillion in total net assets compared to $2.6 trillion in load share

FIGURE 5.12
Net New Cash Flow Was Greatest in No-Load Share Classes
Billions of dollars, 2001–2010

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
All long-term funds $129 $121 $216 $210 $192 $227 $224 -$225 $390 $228
Load 45 26 49 49 31 39 16 -145 30 -33
Front-end load1 23 19 33 46 41 42 19 -104 2 -60
Back-end load2 -2 -18 -20 -40 -47 -47 -42 -39 -24 -27
Level load3 23 24 28 20 17 20 24 -12 30 22
Other load4 1 2 8 22 20 24 15 10 22 34
No-load 5 72 96 125 125 143 164 184 -54 330 253
Retail or general
37 47 82 90 68 74 60 -115 131 28
purpose
Institutional 35 49 43 34 75 91 124 61 199 224
Variable annuities 13 -2 42 36 18 24 25 -26 30 8
1 Front-end load > 1 percent. Primarily includes A shares; includes sales where front-end loads are waived.
2 Front-end load = 0 percent and CDSL > 2 percent. Primarily includes B shares.
3 Front-end load ≤ 1 percent, CDSL ≤ 2 percent, and 12b-1 fee > 0.25 percent. Primarily includes C shares; excludes institutional

share classes.
4 All other load share classes not classified as front-end load, back-end load, or level load. Primarily includes retirement share

classes known as R shares.

5 Front-end load = 0 percent, CDSL = 0 percent, and 12b-1 fee ≤ 0.25 percent.

Note: Components may not add to the total because of rounding. Data exclude mutual funds that invest primarily in other
mutual funds.
Sources: Investment Company Institute and Lipper

76 2011 INVESTMENT COMPANY FACT BOOK

classes (Figure 5.13). The shift toward no-load funds should not be taken as indicating that
investors are eschewing advice from financial advisers. To be sure, some of the flows to no-load
funds owe to “do-it-yourself” investors. However, much of the shift represents a change in the way
investors compensate their financial advisers, with many investors now paying for financial advice
directly out of their pockets instead of indirectly through their mutual funds. Flows from 401(k)
plans and other retirement accounts also are often invested in no-load funds.

FIGURE 5.13
Total Net Assets of Long-Term Funds Were Concentrated in No-Load Share Classes
Billions of dollars, 2001–2010

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
All long-term funds $4,690 $4,118 $5,362 $6,194 $6,864 $8,059 $8,917 $5,771 $7,804 $9,017
Load 1,937 1,552 1,956 2,222 2,409 2,784 2,980 1,844 2,335 2,621
Front-end load1 1,367 1,069 1,360 1,567 1,720 2,014 2,171 1,373 1,744 1,869
Back-end load2 407 309 356 334 271 241 204 102 98 78
Level load3 151 149 214 252 284 334 373 235 325 396
Other load4 12 24 26 68 133 195 233 134 168 279
No-load 5 2,055 1,976 2,605 3,031 3,416 4,051 4,590 3,073 4,332 5,096
Retail or
1,492 1,424 1,862 2,163 2,399 2,798 3,074 1,922 2,650 2,987
general purpose
Institutional 563 552 742 869 1,018 1,252 1,516 1,151 1,682 2,109
Variable annuities 698 591 802 941 1,039 1,225 1,347 855 1,138 1,300
1 Front-end load > 1 percent. Primarily includes A shares; includes sales where front-end loads are waived.
2 Front-end load = 0 percent and CDSL > 2 percent. Primarily includes B shares.
3 Front-end load ≤ 1 percent, CDSL ≤ 2 percent, and 12b-1 fee > 0.25 percent. Primarily includes C shares; excludes institutional

share classes.
4 All other load share classes not classified as front-end load, back-end load, or level load. Primarily includes retirement share

classes known as R shares.

5 Front-end load = 0 percent, CDSL = 0 percent, and 12b-1 fee ≤ 0.25 percent.

Note: Components may not add to the total because of rounding. Data exclude mutual funds that invest primarily in other
mutual funds.
Sources: Investment Company Institute and Lipper

For More Information

»» “Trends in the Fees and Expenses of Mutual Funds, 2010,” ICI Research Perspective
»» “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2009,” Investment
Company Institute Fundamentals
Available at www.ici.org.

MUTUAL FUND FEES AND EXPENSES 77

More than four in 10 U.S. households held mutual funds
in 2010

44%
of U.S. households owned mutual funds
Chapter Six

Characteristics of Mutual Fund

Owners
Ownership of mutual funds by U.S. households has grown significantly in the
past 30 years. Forty-four percent of all U.S. households owned mutual funds
in 2010, compared with less than 6 percent in 1980. The estimated 90 million
individuals who owned mutual funds in 2010 included many different types of
people across all age and income groups with a variety of financial goals. These
fund investors purchase and sell mutual funds through four principal sources:
professional financial advisers (e.g., full-service brokers, independent financial
planners), employer-sponsored retirement plans, fund companies directly, and
fund supermarkets.
 This chapter looks at the characteristics of individual and institutional owners of U.S. mutual funds and
examines how these investors purchase fund shares.

Individual and Household Ownership of Mutual Funds.......................................................................................80

Mutual Fund Ownership by Age and Income..................................................................................................82
Savings Goals of Mutual Fund Investors.........................................................................................................84
Where Investors Own Mutual Funds.......................................................................................................................85
Sources of Mutual Fund Purchases..................................................................................................................87
Adviser Contact in 2009 and 2010..................................................................................................................87
Shareholder Sentiment, Willingness to Take Investment Risk, and Confidence..............................................89
Shareholders’ Use of the Internet...........................................................................................................................92
Institutional Ownership...........................................................................................................................................95

Individual and Household Ownership of Mutual Funds

In 2010, an estimated 90 million individual investors owned mutual funds and held 87 percent
of total mutual fund assets at year-end. Altogether, 51.6 million households, or 44 percent of all
U.S. households, owned funds (Figure 6.1).

Mutual funds represented a significant component of many U.S. households’ financial holdings
in 2010. Among households owning mutual funds, the median amount invested in mutual funds
was $100,000 (Figure 6.2). Seventy-five percent of individuals heading households that owned
mutual funds were married or living with a partner, and 46 percent were college graduates.
Seventy-three percent of these individuals worked full- or part-time.

FIGURE 6.1
44 Percent of U.S. Households Owned Mutual Funds in 2010
Millions and percentage of U.S. households owning mutual funds, selected years

51.6
47.4 48.7

28.4
23.4
12.8
4.6

1980 1985 1990 1995 2000 2005 2010

Percentage of 5.7 14.7 25.1 28.7 44.5 43.0 43.9

U.S. households

Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010.”

80 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 6.2
Characteristics of Mutual Fund Investors
May 2010

How Many People Own Mutual Funds?

90.2 million individuals
51.6 million U.S. households

Who Are They?

50 is the median age of the head of household
75 percent are married or living with a partner
46 percent are college graduates
73 percent are employed (full- or part-time)
18 percent are Silent or GI Generation
44 percent are Baby Boomers
24 percent are Generation X
14 percent are Generation Y
$80,000 is the median household income

What Do They Own?

$200,000 is the median household financial assets
65 percent hold more than half of their financial assets in mutual funds
68 percent own IRAs
77 percent own DC retirement plan accounts
4 mutual funds is the median number owned
$100,000 is the median mutual fund assets
80 percent own equity funds

When and How Did They Make Their First Fund Purchase?
54 percent bought their first mutual fund before 1995
61 percent purchased their first mutual fund through an employer-sponsored retirement plan

Why Do They Invest?

93 percent are saving for retirement
50 percent hold mutual funds to reduce taxable income
47 percent are saving for emergencies
25 percent are saving for education

Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010”; ICI Fundamentals, “Characteristics of Mutual Fund Investors, 2010”;
and Profile of Mutual Fund Shareholders, 2010.

CHARACTERISTICS OF MUTUAL FUND OWNERS 81

Mutual Fund Ownership by Age and Income
The incidence of mutual fund ownership in 2010 was greatest among households in their peak
earning and saving years, that is, between the ages of 35 and 64 (Figure 6.3). About half of all
households in this age group owned mutual funds. Fewer than one-third of households younger
than 35 and fewer than 40 percent of households aged 65 or older owned mutual funds.

Among mutual fund–owning households in 2010, 67 percent were headed by individuals between
the ages of 35 and 64 (Figure 6.4). Fifteen percent of mutual fund–owning households were
headed by individuals younger than 35, and 18 percent were headed by individuals 65 or older.
The median age of individuals heading households owning mutual funds was 50 (Figure 6.2).
Like the U.S. population as a whole, the population of mutual fund–owning households is aging.
Thirty-eight percent of mutual fund–owning households were headed by individuals 55 or older
in 2010 compared with 26 percent in 1994 (Figure 6.4).

The majority of U.S. households owning mutual funds had moderate incomes. One-quarter of
mutual fund–owning households had household incomes of less than $50,000; 20 percent had
household incomes between $50,000 and $74,999; 19 percent had incomes between $75,000 and
$99,999; and the remaining 36 percent had incomes of $100,000 or more. The median household
income of mutual fund–owning households was $80,000 (Figure 6.2).

82 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 6.3
Mutual Fund Ownership Is Greatest Among 35- to 64-Year-Olds
Percentage of U.S. households within each age group,* May 2010

56
51
47
37
31

Younger than 35 35 to 44 45 to 54 55 to 64 65 or older

Age of head of household*

* Age is based on the age of the sole or co-decisionmaker for household saving and investing.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010.”

FIGURE 6.4
The U.S. Population and Mutual Fund Shareholders Are Getting Older
Percentage of households by mutual fund ownership status and age group,* May 2010

Age of head of household*

65 or older
55 to 64
45 to 54
35 to 44
Younger than 35

21 13 18
22
13
13 17 20
21
17
21 27
23 29
18
20
26 22 24
15
1994 2010 1994 2010
All U.S. households Households owning mutual funds

* Age is based on the age of the sole or co-decisionmaker for household saving and investing.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010.”

CHARACTERISTICS OF MUTUAL FUND OWNERS 83

Although individuals across all income groups own mutual funds, households with higher incomes
are more likely to own mutual funds than lower-income households. In 2010, 66 percent of all U.S.
households with incomes of $50,000 or more owned mutual funds, compared with 22 percent of
households with incomes of less than $50,000 (Figure 6.5). In fact, lower-income households are
less likely to have any type of savings. The typical household with income less than $50,000 had
$15,000 in savings and investments, while the typical household with incomes of $50,000 or more
held $160,000 in savings and investments.

Savings Goals of Mutual Fund Investors

Mutual funds play a key role in achieving both the long- and short-term savings goals of U.S.
households. In 2010, 74 percent of mutual fund–owning households indicated that their primary
financial goal for their fund investments was saving for retirement. Ninety-one percent of
households that owned mutual funds held shares inside workplace retirement plans, individual
retirement accounts (IRAs), and other tax-deferred accounts. Households were more likely to
invest their retirement assets in long-term mutual funds than in money market funds. Defined
contribution (DC) retirement plans and IRA assets held in stock, bond, and hybrid mutual
funds totaled $4.3 trillion in 2010 and accounted for 48 percent of those funds’ assets, whereas
retirement account assets in money market funds were $351 billion, or 13 percent of those
funds’ assets.

FIGURE 6.5
Ownership of Mutual Funds Increases with Household Income
Percentage of U.S. households within each income group,* May 2010

$100,000 or more 79

66%
$75,000 to $99,999 71
$50,000 or more

$50,000 to $74,999 48

$35,000 to $49,999 40
22%
$25,000 to $34,999 26 Less than $50,000

Less than $25,000 10

Household income*

* Total reported is household income before taxes in 2009.

Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010.”

84 2011 INVESTMENT COMPANY FACT BOOK

Retirement is not the only financial goal for households’ mutual fund investments. Half of mutual
fund–owning households reported that reducing their taxable income was one of their goals;
47 percent listed saving for an emergency as a goal; and 25 percent reported saving for education
among their goals (Figure 6.2).

Where Investors Own Mutual Funds

The importance of retirement saving among mutual fund investors also is reflected in where they
own their funds. As 401(k) and other employer-sponsored DC retirement plans have become
increasingly popular in the workplace, the fraction of households that make their first foray into
mutual fund investing inside their employer-sponsored retirement plans has increased. Among
those households that made their first mutual fund purchase in 2005 or later, 72 percent did so
inside an employer-sponsored retirement plan (Figure 6.6). Among those households that made
their first purchase before 1990, 52 percent did so inside an employer-sponsored retirement plan.

FIGURE 6.6
Employer-Sponsored Retirement Plans Are Increasingly the Source of First Mutual
Fund Purchase
Percentage of U.S. households owning mutual funds, May 2010

Year of household’s first mutual fund purchase Memo:

all mutual
Before 1990 1995 2000 2005 fund–owning
1990 to 1994 to 1999 to 2004 or later households
Source of first mutual fund purchase
Inside employer-sponsored
52 62 66 66 72 61
retirement plan
Outside employer-sponsored
48 38 34 34 28 39
retirement plan

Note: Employer-sponsored retirement plans include DC plans (such as 401(k), 403(b), or 457 plans) and employer-sponsored
IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “Characteristics of Mutual Fund
Investors, 2010.”

CHARACTERISTICS OF MUTUAL FUND OWNERS 85

In 2010, 68 percent of mutual fund–owning households owned funds inside employer-sponsored
retirement plans, with 28 percent owning funds only inside such plans (Figure 6.7). Seventy-
two percent of mutual fund–owning households owned funds outside of employer-sponsored
retirement accounts, with 32 percent owning funds only outside such plans. However, 63 percent
of mutual fund–owning households without funds in workplace accounts held funds in their IRAs
and in many cases, these IRAs held assets rolled over from 401(k)s or other employer-sponsored
retirement plans (defined benefit or DC plans).

FIGURE 6.7
72 Percent of Mutual Fund–Owning Households Held Shares Outside Employer-
Sponsored Retirement Plans
May 2010

Sources of mutual fund ownership Sources for households owning mutual funds
Percentage of all U.S. households outside employer-sponsored retirement plans
that own mutual funds Percentage of all U.S. households owning mutual
funds outside employer-sponsored retirement plans1

39%
Professional financial advisers2
Outside employer- and fund companies, fund
sponsored retirement 32 supermarkets, or
plans only1 discount brokers
42%
Professional
Inside and outside financial advisers
employer-sponsored 40 only2 11%
retirement plans1 Fund companies, fund
supermarkets, or discount
Inside employer- 8% brokers
sponsored retirement 28 Source unknown
plans only1

1 Employer-sponsored retirement plans include DC plans (401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans
without 401(k) features) and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
2 Professional financial advisers include full-service brokers, independent financial planners, bank and savings institution

representatives, insurance agents, and accountants.

Source: Profile of Mutual Fund Shareholders, 2010

86 2011 INVESTMENT COMPANY FACT BOOK

Sources of Mutual Fund Purchases
Households owning mutual funds outside of workplace retirement plans purchased their funds
through a variety of sources. Indeed, 81 percent of those that owned funds outside a workplace
retirement plan held funds purchased through a professional adviser (Figure 6.7). Professional
financial advisers include full-service brokers, independent financial planners, bank and savings
institution representatives, insurance agents, and accountants. Forty-two percent of investors who
owned funds outside employer-sponsored retirement plans owned funds solely through advisers,
while another 39 percent owned funds purchased from advisers, fund companies directly, or
discount brokers. Eleven percent solely owned funds purchased directly from fund companies or
discount brokers.

Adviser Contact in 2009 and 2010

About half (51 percent) of all mutual fund–owning households indicated they had ongoing
relationships with financial advisers (Figure 6.8). Between June 2009 and May 2010, nearly all
households with advisers had contact with their advisers. Seventy-eight percent of shareholders
who reported using an adviser indicated that both they and their advisers initiated contact
during this time period. Another 12 percent reported contact initiated only by the shareholder,
and 8 percent reported contact initiated only by their adviser.

FIGURE 6.8
About Half of Mutual Fund Shareholders Used an Adviser
May 2010

Shareholder adviser use Contact with advisers within the past 12 months
Percentage of all mutual fund–owning Percentage of mutual fund–owning households
households with ongoing adviser relationships
12%
Shareholder initiated
contact only
78%
Ongoing relationship Both adviser 2%
51
with an adviser and shareholder No contact at all
initiated contact
8%
Adviser initiated
contact only
Did not have
49
an adviser

Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

CHARACTERISTICS OF MUTUAL FUND OWNERS 87

Those who own funds outside DC retirement plans typically hold mutual funds in their investment
portfolios for several years. On average, mutual fund accounts held outside retirement plans
at work have been open for five years (Figure 6.9), and shareholders on average have had a
relationship with the fund company offering the fund(s) for eight years (Figure 6.10).

FIGURE 6.9
The Average Mutual Fund Account Has Been Open for Five Years
Percentage of mutual fund accounts held outside DC retirement plans by age of account, year-end 2009

14%
10 years or more 17%
Less than 1 year

23% 26%
5 to 9 years 1 to 2 years

20%
3 to 4 years

Mean: 5 years
Median: 4 years

FIGURE 6.10
The Average Shareholder Tenure with a Fund Company Is Eight Years
Percentage of mutual fund shareholders by tenure of shareholder with the fund company, year-end 2009

9%
Less than 1 year
35%
10 years or more 17%
1 to 2 years

14%
3 to 4 years
25%
5 to 9 years

Mean: 8 years
Median: 7 years

88 2011 INVESTMENT COMPANY FACT BOOK

Shareholder Sentiment, Willingness to Take Investment Risk, and
Confidence
Shareholder sentiment generally moves with stock market performance largely because of the
impact on mutual fund returns. For example, mutual fund companies’ favorability rose in the late
1990s along with stock prices (measured by the S&P 500), then declined between May 2000 and
May 2003 as stock prices fell, and increased between May 2003 and May 2007 as the stock market
gained (Figure 6.11).

After falling during the market decline in 2008 and 2009, mutual fund favorability rebounded
somewhat as the stock market gained in 2010. Sixty-seven percent of shareholders familiar with
mutual fund companies had “very” or “somewhat” favorable impressions of fund companies in
2010, up from 64 percent in 2009 (Figure 6.11).

FIGURE 6.11
Mutual Fund Shareholder Sentiment Rises and Falls with Stock Market Performance
Percentage of mutual fund shareholders familiar with mutual fund companies, 1998–2010

Mutual fund company favorability rating1

Very favorable
Somewhat favorable
S&P 500,2 May average

1511
1418 1403
1332 1270 1290
28 28 19 1178
31 22 16 19 20 16 1125
16 15
1108 1079 1103 10 12
936 902

55 57 56 55 57 59 57 57 57 56
53 53 54

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total 81 84 83 79 75 71 73 74 76 77 73 64 67
percentage
with positive
opinions1

1 The mutual fund industry favorability rating is the percentage of mutual fund shareholders familiar with the mutual fund
industry who have a “very” or “somewhat” favorable impression of the fund industry.
2 The S&P 500 is an index of 500 stocks chosen for market size, liquidity, and industry group representation.

Sources: Investment Company Institute and Standard & Poor’s. See ICI Fundamentals, “Ownership of Mutual Funds,
Shareholder Sentiment, and Use of the Internet, 2010.”

CHARACTERISTICS OF MUTUAL FUND OWNERS 89

Among all U.S. households, the percentage willing to take above-average or substantial investment
risk tends to move with stock market performance (Figure 6.12). U.S. households become less
tolerant of investment risk in times of poor stock market performance. For example, willingness
to take risk is lower from 2008 to 2010, compared to time periods of higher stock market gains.
Households owning mutual funds also have expressed less willingness to take investment risk in
recent years. In May 2008, 37 percent of U.S. households owning mutual funds were willing to take
above-average or substantial risk with their investments (Figure 6.13). By May 2010, this fraction
had fallen to 31 percent of mutual fund–owning households.

Investors’ confidence that mutual funds are helping them reach their financial goals declined a bit
in the wake of the financial market crisis. In 2009, 73 percent of fund shareholders said they were
confident in mutual funds’ ability to help them achieve their financial goals, compared to 85 percent
in 2008 (Figure 6.14). In 2010, confidence rose: 79 percent of all fund shareholders said they were
confident in mutual funds’ ability to help them achieve their financial goals. Indeed, nearly one-
quarter of fund investors in 2010 were “very” confident that mutual funds could help them meet
their financial goals.

FIGURE 6.12
Households’ Willingness to Take Investment Risk Tends to Move with the S&P 500
Stock Index
Measure is percentage of U.S. households willing to take above-average or substantial investment risk,
1988–2010

ICI measure of willingness to take risk (right scale)

SCF measure of willingness to take risk (right scale)

Index level Percent

1,800 24

1,600 22
1,400 S&P 500 (left scale)
20
1,200
1,000 18

800 16
600
14
400
12
200
0 10
Oct-88
May-89
Nov-89
May-90
Nov-90
May-91
Nov-91
May-92
Nov-92
May-93
Nov-93
May-94
Nov-94
May-95
Nov-95
May-96
Nov-96
May-97
Nov-97
May-98
Nov-98
May-99
Nov-99
May-00
Nov-00
May-01
Nov-01
May-02
Nov-02
May-03
Nov-03
May-04
Nov-04
May-05
Nov-05
May-06
Nov-06
May-07
Nov-07
May-08
Nov-08
May-09
Nov-09
May-10
Sept-10

Sources: ICI Annual Mutual Fund Shareholder Tracking Survey, Federal Reserve Board Survey of Consumer Finances (SCF),
and Standard & Poor’s

90 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 6.13
Households’ Willingness to Take Investment Risk
Percentage of U.S. households by mutual fund ownership status; May 2008, May 2009, and May 2010

Substantial financial risk for substantial financial gain

Above-average risk for above-average gain
Average risk for average gain
Below-average risk for below-average gain
Unwilling to take any risk

5 4 4 6 5 5 4 4 4
8 12 7 11 7 11
18 23 15 19 16 20
37 25 30 26 31
31 26
27 27
37 37
38 8 11 9
50 49
8 11 10 50
61 61 62
53 50 53
44
32
40 33 33 43 10 11
7 20 20
7 14 10 9
2008 2009 2010 2008 2009 2010 2008 2009 2010
All U.S. households Households owning Households not owning
mutual funds mutual funds

Note: Components may not add to 100 percent because of rounding.

Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

FIGURE 6.14
Mutual Fund Shareholders’ Confidence Rose in 2010
Percentage of all mutual fund shareholders by level of confidence that mutual funds can help them meet
their investment goals, 2005–2010

Very confident
Somewhat confident

86 86 84 85
79
73
29 32 31 26 24
18

57 54 53 59 55 55

2005 2006 2007 2008 2009 2010

Note: This question was not included in the survey prior to 2005. The question has four choices; the other two possible
responses are “not very confident” and “not at all confident.”
Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

CHARACTERISTICS OF MUTUAL FUND OWNERS 91

Shareholders’ Use of the Internet
Some shareholders use the Internet to access fund and other investment information. In 2010,
89 percent of U.S. households owning mutual funds had Internet access (Figure 6.15), up from
68 percent in 2000—the first year in which ICI measured shareholders’ access to the Internet.
Similar to all U.S. households and households owning DC plans, the incidence of Internet access
traditionally has been greatest among younger mutual fund shareholders. Increases in Internet
access among older shareholder segments, however, have narrowed the generational gap
considerably. Overall, eight in 10 mutual fund–owning households with Internet access used
the Internet daily.

FIGURE 6.15
Internet Access Is Widespread Among Mutual Fund–Owning Households
Percentage of households with Internet access, May 2005 and May 2010

Mutual fund– Households with

All U.S. households owning households DC plans
Had Had Had Had Had Had
Internet Internet Internet Internet Internet Internet
access in access in access in access in access in access in
2005 2010 2005 2010 2005 2010
Respondent age
Younger than 35 82 84 95 96 93 94
35 to 49 81 85 91 95 90 93
50 to 64 74 77 90 91 87 88
65 or older 34 49 60 70 58 74

Respondent education
High school graduate or less 51 57 75 77 73 79
Some college or associate’s
82 84 87 90 90 92
degree
College or postgraduate degree 89 91 94 96 95 96

Household income*
Less than $50,000 55 59 74 76 75 78
$50,000 to $99,999 84 87 90 90 90 92
$100,000 to $149,999 95 98 97 97 95 98
$150,000 or more 96 95 96 97 98 95

Total 70 75 87 89 86 90

* Total reported is household income before taxes in prior year.

Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

92 2011 INVESTMENT COMPANY FACT BOOK

In 2010, 82 percent of shareholders with Internet access went online for financial purposes, most
often to obtain investment information or check their bank or investment accounts (Figure 6.16).
In addition, mutual fund–owning households were much more likely than non-fund-owning
households to engage in common online activities, such as accessing email, obtaining information
about products and services other than investments, or purchasing products and services other
than investments.

FIGURE 6.16
Most Mutual Fund Shareholders Used the Internet for Financial Purposes
Percentage of fund-owning and non-fund-owning households with Internet access in the past 12 months
by online activities, 1, 2 May 2010

Households owning Households not

mutual funds owning mutual funds
Accessed email 91 85

Used Internet for a financial purpose (total) 82 62

Accessed any type of financial account, such as bank
79 57
or investment accounts
Obtained investment information 58 23
Bought or sold investments online 21 9

Used Internet for a nonfinancial purpose (total) 91 78

Obtained information about products and services other
83 68
than investments
Bought or sold something other than investments online 81 64
1 Online activities are based on the sole or co-decisionmaker for household saving and investing.
2 Forthis survey, the past 12 months were June 2009 through May 2010.
Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

CHARACTERISTICS OF MUTUAL FUND OWNERS 93

Younger shareholders, shareholders with higher education levels, and shareholders with higher
household incomes all reported the highest levels of Internet use for financial and nonfinancial
purposes (Figure 6.17). About nine in 10 members of these groups indicated using the Internet for
these online tasks.

FIGURE 6.17
Mutual Fund Shareholders’ Use of the Internet by Age, Education, and Income for 2010
Percentage of U.S. households with Internet access by mutual fund ownership and online activities in past
12 months, 1, 2 May 2010

Used Internet for

Used Internet for a a nonfinancial
Accessed email financial purpose purpose
Respondent age
Younger than 35 95 89 92
35 to 49 93 86 93
50 to 64 92 79 92
65 or older 83 73 82

Respondent education
High school graduate or less 80 69 83
Some college or associate’s degree 92 84 90
College or postgraduate degree 96 87 95

Household income 3
Less than $50,000 85 69 83
$50,000 to $99,999 91 83 91
$100,000 to $149,999 92 87 94
$150,000 or more 98 91 97

Total 91 82 91
1 Online activities are based on the household’s sole or co-decisionmaker for saving and investing.
2 For this survey, the past 12 months were June 2009 through May 2010.
3 Total reported is household income before taxes in 2009.

Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Fundamentals, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010”

94 2011 INVESTMENT COMPANY FACT BOOK

Institutional Ownership
Nonfinancial businesses, financial institutions, nonprofit organizations, and other institutional
investors held 13 percent of mutual fund assets at year-end 2010 (Figure 6.18). Institutional investor
data exclude mutual fund holdings by fiduciaries, retirement plans, and variable annuities, which
are considered to be held primarily by individual investors.

As of year-end 2010, nonfinancial businesses were the largest segment of institutional investors
in mutual funds, holding $730 billion in corporate and similar accounts. These firms primarily
use mutual funds as a cash management tool, and 71 percent of their mutual funds holdings
were money market funds. Business investments in funds do not include assets held by funds in
retirement plans on behalf of employees in employer-sponsored retirement plans, since those
assets are considered employee assets rather than employer assets.

Financial institutions—which include credit unions, investment clubs, banks, and insurance
companies—were the second-largest component of institutional investors in mutual funds.
Financial institutions held $544 billion in fund assets at year-end 2010. Nonprofit organizations and
other institutional investors held $131 billion and $141 billion, respectively, in mutual fund accounts.
Institutional investors overwhelmingly held money market funds as the primary type of mutual
fund. Across all types of institutional investors, 63 percent of investments in mutual funds were in
money market funds at year-end 2010.

CHARACTERISTICS OF MUTUAL FUND OWNERS 95

 FIGURE 6.18
Institutional and Household Ownership of Mutual Funds
Billions of dollars, year-end 2010

Households held the majority (87 percent) Nonfinancial businesses are the largest type
of mutual fund assets of institutional investor
Assets in long-term and money market funds
by type of institution
$1,824
Households’1 money Money market funds
market funds Long-term mutual funds2

$730
$980
Institutional investors’
money market funds $544
$567 517
Institutional investors’
362
long-term mutual funds2
$8,450
Households’1 long-term $131 $141
mutual funds2 213 50 50
183
81 90
Nonfinancial Financial Nonprofit Other
businesses institutions organizations institutional
investors3
Total mutual fund assets: $11,821 billion
Total long-term2 mutual fund assets: $9,017 billion
Total money market fund assets: $2,804 billion Type of institutional investor

1 Mutual funds held as investments in variable annuities and 529 plans are counted as household holdings of mutual funds.
2 Long-term mutual funds include stock, hybrid, and bond mutual funds.
3 This category includes state and local governments and other institutional accounts not classified.

Note: Components may not add to the total because of rounding.

96 2011 INVESTMENT COMPANY FACT BOOK

 For More Information
»» Profile of Mutual Fund Shareholders, 2010
»»“Characteristics of Mutual Fund Investors, 2010,” Investment Company Institute
Fundamentals
»»“Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2010,”
Investment Company Institute Fundamentals
Available at www.ici.org.

CHARACTERISTICS OF MUTUAL FUND OWNERS 97

U.S. retirement assets were $17.5 trillion in 2010

$17.5 trillion
at year-end 2010
Chapter Seven

Retirement and Education Savings

National policies that have created or enhanced tax-advantaged savings
accounts have proven integral to helping Americans prepare for retirement and
other long-term savings goals. Because many Americans use mutual funds in
tax-advantaged accounts to reach these goals, ICI studies the U.S. retirement
market; the investors who use IRAs, 401(k) plans, 529 plans, and other tax-
advantaged savings vehicles; and the role of funds in the retirement and
education savings markets.
 This chapter analyzes the U.S. retirement market; describes the investors who use IRAs, 401(k) plans,
529 plans, and other tax-advantaged savings vehicles; and explores the role of mutual funds in U.S.
households’ efforts to save for retirement and education.

The U.S. Retirement System................................................................................................................................. 100

Defined Contribution Plans....................................................................................................................................103
401(k) Participants: Asset Allocations, Account Balances, and Loans..................................................... 104
Distributions from Defined Contribution Plans............................................................................................ 108
Services and Expenses in 401(k) Plans........................................................................................................ 109
Individual Retirement Accounts........................................................................................................................... 112.
IRA Investors.................................................................................................................................................. 113
Distributions from IRAs................................................................................................................................. 116
The Role of Mutual Funds in Households’ Retirement Savings........................................................................ 118
Types of Mutual Funds Used by Retirement Plan Investors........................................................................ 119
The Role of Mutual Funds in Households’ Education Savings.......................................................................... 120

The U.S. Retirement System

In retirement, Americans rely on a combination of resources including Social Security benefits
and income from employer-sponsored retirement plans, individual retirement accounts (IRAs),
and annuities. Reliance on each of these components varies by individual.

The largest component of retiree income and the predominant income source for lower-income
retirees is Social Security benefits. Social Security benefits are funded through a payroll tax equal
to 12.4 percent of earnings of covered workers (6.2 percent paid by employees* and 6.2 percent
paid by employers) up to a maximum taxable earnings amount ($106,800 in 2010). The Social
Security benefit formula is highly progressive, with benefits representing a much higher percentage
of earnings for workers with lower lifetime earnings. For individuals born in the 1940s, the
Congressional Budget Office (CBO) projects that Social Security benefits will replace, on average,
71 percent of average earnings for the bottom 20 percent of retired workers ranked by lifetime
earnings (Figure 7.1). This replacement rate drops to 50 percent for the second quintile of retired
workers, and then declines more slowly as lifetime earnings increase. For even the top 20 percent
of earners, Social Security benefits are projected to replace a considerable fraction (31 percent)
of earnings. Over time, Social Security has become a system designed to be the primary means
of support for retirees with low lifetime earnings and a substantial source of income for all retired
workers.

Employer-sponsored retirement plans, IRAs, and annuities also play an important role in the
U.S. retirement system. Such retirement assets increased to $17.5 trillion at year-end 2010, up

* For 2011, this rate has been temporarily changed to 4.2 percent.

100 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.1
Social Security Benefit Formula Is Highly Progressive
CBO estimates of first-year benefits relative to average indexed earnings by household lifetime earnings,
1940s birth cohort, percent

71

50
43
38
31

Lowest Second Middle Fourth Highest

Quintiles of household lifetime earnings

Source: Congressional Budget Office (CBO’s 2010 Long-Term Projections for Social Security: Additional Information)

FIGURE 7.2
U.S. Retirement Assets Increased in 2010
Trillions of dollars, year-end, selected years

Other plans1
DC plans2
IRAs
17.9 17.5
16.7 16.0
13.8 13.9
11.7 8.7 8.3
10.5 8.4 7.7
7.1 6.9
7.0 6.1
5.5 4.4 4.5
4.1 4.1
3.9 4.0 3.3 3.4
3.0 2.5
2.4 1.7 4.2p 4.8p 4.3e 4.7e
0.9 0.6 1.3 2.6 2.5 3.3 3.6e
1990 1995 2000 2002 2004 2006 2007 2008 2009 2010

1 Other plans include private-sector DB plans; federal, state, and local pension plans; and all fixed and variable annuity reserves
at life insurance companies less annuities held by IRAs, 403(b) plans, 457 plans, and private pension funds. Federal pension
plans include U.S. Treasury security holdings of the civil service retirement and disability fund, the military retirement fund, the
judicial retirement funds, the Railroad Retirement Board, and the foreign service retirement and disability fund. These plans
also include securities held in the National Railroad Retirement Investment Trust and Federal Employees Retirement System
(FERS) Thrift Savings Plan (TSP).
2 DC plans include 403(b) plans, 457 plans, and private employer-sponsored DC plans (including 401(k) plans).

e Data are estimated.

p Data are preliminary.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined Contribution
Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division. See “The U.S.
Retirement Market, Fourth Quarter 2010.”

RETIREMENT AND EDUCATION SAVINGS 101

9 percent from year-end 2009 (Figure 7.2). The largest components of retirement assets were
IRAs and employer-sponsored defined contribution (DC) plans, holding $4.7 trillion and
$4.5 trillion, respectively, at year-end 2010. Other employer-sponsored pensions include private-
sector defined benefit (DB) pension funds ($2.2 trillion), state and local government employee
retirement plans ($3.0 trillion), and federal government DB plans and the federal employees’
Thrift Savings Plan ($1.4 trillion). In addition, there were $1.6 trillion in annuity reserves outside
of retirement plans at year-end 2010.

Seventy percent of U.S. households (or 82 million households) reported that they had employer-
sponsored retirement plans, IRAs, or both in May 2010 (Figure 7.3). Sixty-two percent of U.S.
households reported that they had employer-sponsored retirement plans—that is, they had
assets in DC plan accounts, were receiving or expecting to receive benefits from DB plans, or
both. Forty-one percent of households reported having assets in IRAs. Thirty-three percent
of households had both IRAs and employer-sponsored retirement plans.

Ownership of IRA and DC plan assets has become more common with each successive generation
of workers. This can be seen by comparing the ownership rates of households grouped by the
decade in which the household heads were born (Figure 7.4). At any given age, younger households
have had higher ownership rates over time. For example, in 2010, when they were 51 to 60 years of
age, 72 percent of households born in the 1950s owned IRAs and DC plan accounts. By comparison,
households born a decade earlier had a 64 percent ownership rate when they were aged 52 to 61 in

FIGURE 7.3
Many U.S. Households Had Tax-Advantaged Retirement Savings
Percentage of U.S. households, May 2010

8%
Had IRA only1

30%
Did not have IRA or 33%
employer-sponsored Had IRA and
retirement plan employer-sponsored
retirement plan1, 2

29%
Had employer-sponsored
retirement plan only2

Total number of U.S. households: 117.5 million

1 IRAs include traditional IRAs, Roth IRAs, and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
2 Employer-sponsored retirement plans include DC and DB retirement plans.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “The Role of IRAs in U.S. Households’
Saving for Retirement, 2010.”

102 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.4
Younger Households Have Had Higher and Faster Growing Rates of IRA or Defined
Contribution Plan Ownership
Percentage of U.S. households owning IRAs or DC plans by decade in which household heads were
born, 1989–2010

1989 1992 1995 1998 2001 2004 2007 2008 2010

80 80
Born 1970 to 1979 Born 1940 to 1949
70 70
Born 1930 to 1939
60 60

50 50

40 40
Born 1950 to 1959
30 30
Born 1920 to 1929
20 20
Born 1960 to 1969
10 10

0 0
20 25 30 35 40 45 50 55 60 65 70 75 80 85

Age at time of survey

Note: Age is the average age of the 10-year birth cohort at the time of the survey. The 10-year birth cohorts are defined using
the age of the head of household.
Sources: ICI tabulations of Federal Reserve Board Survey of Consumer Finances 1989–2007 and ICI Annual Mutual Fund
Shareholder Tracking Surveys 2000–2010

2001. At younger ages, the differences between birth cohorts are even greater. For example,
70 percent of households with heads born in the 1970s held assets in IRAs or DC plan accounts in
2010 when they were aged 31 to 40. In contrast, those born in earlier decades had lower ownership
rates at similar ages. Sixty-five percent of households born in the 1960s owned IRAs or DC plan
accounts in 2001, when they were then aged 32 to 41, and 48 percent of households born in the
1950s owned IRAs or DC plan accounts in 1992, when they were aged 33 to 42.

Defined Contribution Plans

DC plans provide employees with an account derived from employer or employee contributions
or both, plus investment earnings or losses on those contributions, less withdrawals from the plans.
Assets in employer-sponsored DC plans have grown more rapidly than assets in other types of
employer-sponsored retirement plans over the past quarter century, increasing from 27 percent
of employer plan assets in 1985 to 40 percent at year-end 2010. At the end of 2010, employer-
sponsored DC plans—which include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other

RETIREMENT AND EDUCATION SAVINGS 103

DC plans—held an estimated $4.5 trillion in assets (Figure 7.5). With $3.1 trillion in assets at year-
end 2010, 401(k) plans held the largest share of employer-sponsored DC plan assets. Two types
of plans similar to 401(k) plans—403(b) plans, which allow employees of educational institutions
and certain nonprofit organizations to receive deferred compensation, and 457 plans, which
allow employees of state and local governments and certain tax-exempt organizations to receive
deferred compensation—held another $939 billion in assets. The remaining $530 billion in DC plan
assets were held by other DC plans without 401(k) features.

FIGURE 7.5
Defined Contribution Plan Assets by Type of Plan
Billions of dollars, year-end, selected years

Other DC plans*
403(b) plans and 457 plans
401(k) plans
4,444 4,525
4,147 4,084
555 530
3,344 531 3,416 490
2,970 907 939
453 847 427 869
618 2,471
703 759
1,717 366
627 532
492 2,768 2,982 3,056e
2,189 2,230 2,725e
361 1,725 1,573
864
1995 2000 2002 2004 2006 2007 2008 2009 2010

* Other DC plans include Keoghs and other DC plans (profit-sharing, thrift-savings, stock bonus, and money purchase)
without 401(k) features.
e Data are estimated.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute, Federal Reserve Board, Department of Labor, National Association of Government
Defined Contribution Administrators, and American Council of Life Insurers

401(k) Participants: Asset Allocations, Account Balances, and Loans

For many American workers, 401(k) plan accounts have become an important part of their
retirement planning. The income these accounts provide in retirement depends, in part, on
the asset allocation decisions of plan participants.

104 2011 INVESTMENT COMPANY FACT BOOK

On average, younger participants allocate a larger portion of their portfolio to equities (which
include equity mutual funds and other pooled equity investments; the equity portion of balanced
funds, including target date funds; and company stock of their employers). According to research
conducted by ICI and the Employee Benefit Research Institute (EBRI), at year-end 2009,
individuals in their twenties invested 46 percent of their assets in equity funds and company
stock; 35 percent in target date funds and non–target date balanced funds; and 17 percent in
guaranteed investment contracts (GICs), stable value funds, money funds, and bond funds
(Figure 7.6). All told, participants in their twenties had 73 percent of their 401(k) assets in

FIGURE 7.6
401(k) Asset Allocation Varied with Participant Age
Average asset allocation of 401(k) account balances, percentage of assets, year-end 2009

Participants in their twenties

5.5%
GICs and other stable
value funds 3.3%
Other funds 7.3%
3.5% Company stock
Money funds
7.7%
Bond funds
38.3%
Equity funds
23.5%
Target date funds

11.2%
Non–target date balanced funds

Participants in their sixties

8.3%
4.1%
Company stock
Other funds
19.9%
GICs and other stable 32.2%
value funds Equity funds

7.3%
Money funds
6.9%
13.9% Non–target date balanced funds
Bond funds 7.6%
Target date funds

Note: Funds include mutual funds, bank collective trusts, life insurance separate accounts, and any pooled investment
product invested primarily in the security indicated. Components may not add to 100 percent because of rounding. Percentages
are dollar-weighted averages.
Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Perspective, “401(k)
Plan Asset Allocation, Account Balances, and Loan Activity in 2009.”

RETIREMENT AND EDUCATION SAVINGS 105

equities. By comparison, at year-end 2009, individuals in their sixties invested 41 percent of their
assets in equity funds and company stock, 15 percent in target date funds and non–target date
balanced funds, and 41 percent in GICs, stable value funds, money funds, and bond funds. All told,
participants in their sixties had 48 percent of their 401(k) assets in equities.

Within age groups, however, portfolio allocation varies widely. For example, at year-end 2009,
54 percent of 401(k) participants in their twenties held more than 80 percent of their account in
equities and 17 percent held 20 percent or less (Figure 7.7). Of 401(k) participants in their sixties,
22 percent held more than 80 percent of their account in equities and 29 percent held 20 percent
or less.

Only in existence since the mid-1990s, target date funds (including both target date mutual funds
and other pooled target date investments) have grown rapidly in recent years. A target date fund
follows a predetermined reallocation of assets over time based on a specified target retirement
date, and typically the fund rebalances its portfolio to become less focused on growth and more
focused on income as it approaches and passes the target date, which is usually indicated in the
fund’s name. At year-end 2009, target date fund assets represented about 10 percent of total
401(k) assets, up from 5 percent at year-end 2006 (Figure 7.8).

FIGURE 7.7
Asset Allocation to Equities Varied Widely Among 401(k) Participants
Asset allocation distribution of 401(k) participant account balance to equities, percentage of participants,
year-end 2009

Percentage of account balance in equities

>80 percent
>60 to 80 percent
>40 to 60 percent
>20 to 40 percent
1 to 20 percent
Zero
22.3

54.2 15.2

20.3
18.8 12.9
6.5 10.4
3.6
3.3
13.6 18.9
Participants in their twenties Participants in their sixties

Note: Equities include equity funds, company stock, and the equity portion of balanced funds. Funds include mutual funds,
bank collective trusts, life insurance separate accounts, and any pooled investment product invested primarily in the
security indicated. Components may not add to 100 percent because of rounding.
Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Perspective, “401(k)
Plan Asset Allocation, Account Balances, and Loan Activity in 2009.”

106 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.8
Target Date Funds’ 401(k) Market Share
Measures of percentage of total 401(k) market, year-end, 2006–2009

2006
2007
2008
2009

75 77 72 71
67 68
62
57

31 33
25
19
5 7 7 10

Plans offering Participants offered Participants holding Assets

Note: Funds include mutual funds, bank collective trusts, life insurance separate accounts, and any pooled investment product
invested primarily in the security indicated.
Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Perspective, “401(k)
Plan Asset Allocation, Account Balances, and Loan Activity in 2009.”

The share of 401(k) plans offering target date funds increased to 77 percent in 2009 from
57 percent in 2006, and the share of 401(k) plan participants offered target date funds increased
to 71 percent from 62 percent over the same period. Because not all plan participants choose to
allocate assets to the funds, the percentage of 401(k) participants with target date fund assets
was lower than the percentage of participants who were offered the option. At year-end 2009,
33 percent of 401(k) participants held at least some plan assets in target date funds, up from
19 percent at year-end 2006. In addition, because not all participants with assets in the funds
allocated 100 percent of their holdings to the funds, and because participants with assets in the
funds were more likely to be younger or recently hired and have lower account balances, the share
of 401(k) assets invested in target date funds was lower than the share of participants invested in
the funds.

RETIREMENT AND EDUCATION SAVINGS 107

Account balances tended to be higher the longer 401(k) plan participants had been working
for their current employers and the older the participant. Workers in their sixties with at least
30 years of tenure at their current employers had an average 401(k) account balance of $198,993
(Figure 7.9). The median age of 401(k) plan participants was 45 years at year-end 2009, and the
median job tenure was 6 years.

Most 401(k) participants do not borrow from their plans, although loan activity has edged up in
recent years. At year-end 2009, 21 percent of those eligible for loans had loans outstanding. The
average unpaid loan balance for these participants represented about 15 percent of their 401(k)
account balances (net of the unpaid loan balances).

FIGURE 7.9
401(k) Balances Tend to Increase with Participant Age and Job Tenure
Average 401(k) participant account balance, year-end 2009

Dollars
$200,000 60s
50s
$150,000

40s
$100,000

$50,000 30s

20s
0
0 to 2 >2 to 5 >5 to 10 >10 to 20 >20 to 30 >30
Participant job tenure (years)

Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Perspective, “401(k)
Plan Asset Allocation, Account Balances, and Loan Activity in 2009.”

Distributions from Defined Contribution Plans

With DC plans representing an increasing share of household retirement assets, the decisions
participants make about distributing those assets in retirement have become an issue of increasing
interest to plan sponsors, financial institutions, and policymakers. In late 2007, ICI surveyed
recent retirees who had actively participated in DC plans about how they used plan proceeds at
retirement. Just over half (52 percent) of surveyed DC plan retirees received all their distributions
as lump sums, and another 7 percent received a portion of their distributions as lump sums. The
remainder deferred withdrawal (i.e., left their money in their plans), received their distribution as
annuities or installment payments, or chose some combination of options that did not include lump
sums.

108 2011 INVESTMENT COMPANY FACT BOOK

Of respondents who received lump-sum distributions, 86 percent of respondents rolled over some
or all of the balance to an IRA or otherwise reinvested the assets (Figure 7.10). Indeed, distributions
from employer-sponsored retirement plans (of all types) are an important source of funds in IRAs.
The remaining 14 percent spent all of the proceeds of the distribution. Because retirees who spent
some or all of their lump-sum distributions tended to have lower account balances, only 7 percent
of the total dollars distributed as lump sums at retirement were spent immediately.

FIGURE 7.10
Use of Lump-Sum Distributions from Defined Contribution Plans at Retirement
Percentage of respondents*

14%
Spent all proceeds

65 Rolled over all to IRA

9 Rolled over some to IRA, spent some

86% 11 Rolled over some to IRA, reinvested some outside IRA, spent some
Reinvested some or all
3 Rolled over some to IRA, reinvested some outside IRA, spent none
of the proceeds
4 Reinvested all outside IRA
8 Reinvested some outside IRA, spent some

* Based upon respondents’ recall. Responses are from a survey of employees retiring between 2002 and 2007 who were
interviewed in the fall of 2007.
Source: Investment Company Institute, Defined Contribution Plan Distribution Choices at Retirement

Services and Expenses in 401(k) Plans

Employers are confronted with two competing economic pressures: the need to attract and retain
quality workers with competitive compensation packages and the need to keep their products and
services competitively priced. In deciding whether to offer 401(k) plans to their workers, employers
must decide if the benefits of offering a plan (in attracting and retaining quality workers) outweigh
the costs of providing the plan and plan services—both the compensation paid to the worker and
any other costs associated with maintaining the plan and each individual plan participant account.

To provide and maintain 401(k) plans, employers are required to obtain a variety of administrative,
participant-focused, regulatory, and compliance services. Employers offering 401(k) plans typically
hire service providers to operate these plans, and these providers charge fees for their services.

RETIREMENT AND EDUCATION SAVINGS 109

As with any employee benefit, the employer generally determines how the costs will be shared
between the employer and employee. Fees can be paid directly by the plan sponsor (i.e.,
employer), directly by the plan participants (i.e., employees), indirectly by the participants through
fees or other reductions in returns paid to the investment provider, or by some combination of
these methods (Figure 7.11).

Participants in 401(k) plans holding mutual funds tend to invest in lower-cost funds and funds with
below-average portfolio turnover. Both characteristics help to keep down the costs of investing
in mutual funds through 401(k) plans. For example, at year-end 2009, 27 percent of 401(k) stock
mutual fund assets were in funds that had total annual expense ratios below 0.50 percent of
fund assets, and another 49 percent had expense ratios between 0.50 percent and 1.00 percent
(Figure 7.12). On an asset-weighted basis, the average total expense ratio incurred on 401(k)
participants’ holdings of stock mutual funds through their 401(k) plans was 0.74 percent in 2009,
compared with an asset-weighted average total expense ratio of 0.86 percent for stock mutual
funds industrywide. Similarly, stock mutual funds held in 401(k) accounts tend to have lower
turnover in their portfolios. The asset-weighted average turnover rate of stock funds held in
401(k) accounts was 54 percent in 2009, compared with an industrywide asset-weighted average
of 64 percent. Fifty-nine percent of 401(k) assets at year-end 2010 were invested in mutual funds.

A Deloitte/ICI study of 130 plan sponsors in late 2008 created and analyzed a comprehensive plan
fee measure, the “all-in fee.” The study found a range of fees across 401(k) plans and that a key
driver of the all-in fee is plan size. Specifically, plans with more participants and larger average
account balances tended to have lower all-in fees than plans with fewer participants and smaller
average account balances. This observed effect likely results in part from fixed costs required
to start up and run the plan, much of which are driven by legal and regulatory requirements.
It appears that economies are gained as a plan grows in size because these fixed costs can be
spread over more participants or a larger asset base or both. The Deloitte/ICI study also found that
employers that sponsor smaller plans (plans with less than $10 million in assets), on average, paid
a larger share of plan fees than employers sponsoring larger plans (plans with $10 million or more
in assets).

110 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.11
A Variety of Arrangements May Be Used to Compensate 401(k) Service Providers

Services and products provided

Fee payment/form of fee payment

Direct fees: dollar per participant;

percentage based on assets; transactional fees
Recordkeeper/
Employer/Plan Retirement
service provider
Recordkeeping and administration; plan service and
Direct fees: dollar per participant; consulting; legal, compliance, and regulatory Recordkeeping/
percentage based on assets; administrative
transactional fees payment
Participant service, education, advice, and communication Recordkeeping; (percentage
distribution of assets)

Participants Asset management; investment products Investment provider(s)

Expense ratio (percentage of assets)

Note: In selecting the service provider(s) and deciding the cost sharing for the 401(k) plan, the employer/plan sponsor will
determine which combinations of these fee arrangements will be used in the plan.
Source: ICI Fundamentals, “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2009”

FIGURE 7.12
401(k) Stock Mutual Fund Assets Are Concentrated in Lower-Cost Funds
Percentage of 401(k) stock mutual fund assets, year-end 2009

49

27
20

<0.50 0.50 to <1.00 1.00 to <1.50 ≥1.50

Total expense ratio*

* The total expense ratio, which is reported as a percentage of fund assets, includes fund operating expenses and 12b-1 fee.
Note: Figures exclude mutual funds available as investment choices in variable annuities. Stock funds include hybrid funds.
Sources: Investment Company Institute and Lipper. See ICI Fundamentals, “The Economics of Providing 401(k) Plans:
Services, Fees, and Expenses, 2009.”

RETIREMENT AND EDUCATION SAVINGS 111

Individual Retirement Accounts
IRAs were designed with two goals when they were created in 1974 under the Employee Retirement
Income Security Act (ERISA). First, they provide individuals not covered by workplace retirement
plans with an opportunity to save for retirement on their own. Second, they allow workers who
are leaving jobs a means to preserve the tax benefits and growth opportunities that employer-
sponsored retirement plans provide.

IRA assets accounted for 27 percent of U.S retirement assets with $4.7 trillion at year-end
2010 (Figure 7.13). Mutual fund assets held in IRAs were $2.2 trillion at year-end 2010, an increase
of $248 billion, or 13 percent, from year-end 2009. Assets managed by mutual funds were
the largest component of IRA assets, followed by securities held through brokerage accounts
($1.7 trillion at year-end 2010). The mutual fund industry’s share of the IRA market was 47 percent
at year-end 2010, compared with 46 percent at year-end 2009.

FIGURE 7.13
IRA Assets
Billions of dollars, year-end, selected years

Securities held through brokerage accounts1

Life insurance companies2
Bank and thrift deposits3
Mutual funds
4,784p 4,710e
4,207p 4,251 e

1,806 p
3,585e 1,690e
3,299 1,526 e
1,541p
2,629 327e 1,274e 337e
2,533 1,216
318 340 320e 460
920 313 316e 431
945 283
269 391
1,288 203 268
250
464 263 2,036 2,311 2,222
1,974
81 1,532 1,604
261 1,256 1,057
482
1995 2000 2002 2004 2006 2007 2008 2009 2010

1 Category excludes mutual fund assets held through brokerage accounts, which are included in mutual funds.
2 Life insurance company IRA assets are annuities held by IRAs, excluding variable annuity mutual fund IRA assets, which are
included in mutual funds.
3 Bank and thrift deposits include Keogh deposits.

e Data are estimated.

p Data are preliminary.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute, Federal Reserve Board, American Council of Life Insurers, and Internal Revenue
Service Statistics of Income Division

112 2011 INVESTMENT COMPANY FACT BOOK

Since 1990, assets in IRAs have grown primarily due to the investment performance of the
securities held in IRA portfolios and rollovers into traditional IRAs from employer-sponsored
retirement plans. Although they represent only a small portion of the overall IRA market, assets
in two new types of IRAs—SIMPLE IRAs and Roth IRAs—have grown rapidly since they were
introduced in the late 1990s.

IRA Investors
More than four out of 10 U.S. households, or 49 million, owned IRAs as of mid-2010 (Figure 7.14).
Traditional IRAs—defined as those IRAs first allowed under ERISA—were the most common type
of IRA, owned by 39 million U.S. households. Roth IRAs, first made available in 1998 under the
Taxpayer Relief Act of 1997, were owned by 20 million U.S. households in mid-2010. Over 9 million
U.S. households owned employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, or SIMPLE IRAs).

Although most U.S. households were eligible to make contributions to IRAs, few did so. Only
15 percent of U.S. households contributed to any type of IRA in tax year 2009. In addition, very
few eligible households made “catch-up” contributions to traditional or Roth IRAs.

FIGURE 7.14
49 Million U.S. Households Owned IRAs
May 2010

Number of Percentage of
U.S. households U.S. households
Year created with type of IRA with type of IRA
1974
Traditional IRA (Employee Retirement 38.5 million 32.8%
Income Security Act)
1978
SEP IRA
(Revenue Act)
1986
SAR-SEP IRA
(Tax Reform Act) 9.4 million 8.0%
1996
SIMPLE IRA (Small Business Job
Protection Act)
1997
Roth IRA 19.5 million 16.6%
(Taxpayer Relief Act)
Any IRA 48.6 million 41.4%

Note: Households may own more than one type of IRA. SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs are employer-sponsored IRAs.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Fundamentals, “The Role of IRAs in U.S.
Households’ Saving for Retirement, 2010.”

RETIREMENT AND EDUCATION SAVINGS 113

Instead, investment returns and rollovers from employer-sponsored retirement plans have fueled
the growth of IRAs. In any given year, a small portion of traditional IRA investors makes rollovers,
but analysis of The IRA Investor DatabaseTM finds that it is largely a different group that make
rollovers year-to-year. For example, of investors with IRAs at year-end 2008, 21 percent had made
a rollover in 2007 or 2008, with 11 percent making a rollover in 2008, 11 percent in 2007, and only
1 percent in both years (Figure 7.15). The proportion of IRA owners that have ever made a rollover
is higher because typically different investors make rollovers each year. Of U.S. households owning
traditional IRAs in May 2010, an ICI household survey found that 55 percent (or 21 million U.S.
households) had traditional IRAs that included rollover assets (Figure 7.16). In their most recent
rollover, the vast majority of these households (85 percent) transferred their entire retirement plan
balances into traditional IRAs.

FIGURE 7.15
Rollover Activity in The IRA Investor Database™
Percentage of traditional IRA investors aged 25 to 74, 2008

20.8

11.3

With rollover in 2008 With rollover in 2007 or 2008

Source: The IRA Investor Database™

FIGURE 7.16
Rollovers Are Often a Source of Assets for Traditional IRA Investors
Percentage of households owning traditional IRAs, May 2010

45% 55%
Traditional IRA–owning Traditional IRA–owning households
households reported no rollovers have made rollovers at some time

Source: ICI Fundamentals, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2010”

114 2011 INVESTMENT COMPANY FACT BOOK

Households owning IRAs generally are headed by middle-aged individuals (median age 51 years)
with moderate household incomes (median income $73,000). These households held a median
of $36,000 in IRAs. In addition, many households held multiple types of IRAs. For example,
32 percent of households with traditional IRAs also owned Roth IRAs, and 14 percent also
owned employer-sponsored IRAs.

IRA owners are more likely to hold mutual funds, especially long-term mutual funds, in their
IRA portfolios than any other type of investment (Figure 7.17). Sixty-three percent of IRA-
owning households had IRA assets invested in mutual funds, with about three-quarters of these
households holding at least a portion of their balance in stock mutual funds. Far fewer households
owned other types of investments in their IRAs: 36 percent held individual stocks, 28 percent held
annuities, and 25 percent held bank deposits.

FIGURE 7.17
Households Invested Their IRAs in Many Types of Assets
Percentage of U.S. households owning IRAs, May 2010*

Mutual funds (total) 63

Stock mutual funds 48
Bond mutual funds 30
Hybrid mutual funds 26
Money market funds 27
Individual stocks 36
Annuities (total) 28
Fixed annuities 19
Variable annuities 19
Bank savings accounts, money market deposit accounts, 25
or certificates of deposit
Individual bonds (not including U.S. savings bonds) 11
U.S. savings bonds 11
ETFs 8
Other 5

* Multiple responses are included.

Source: ICI Fundamentals, “Appendix: Additional Data on IRA Ownership in 2010”

RETIREMENT AND EDUCATION SAVINGS 115

Distributions from IRAs
Of households with traditional IRAs in May 2010, 15 percent took withdrawals in tax year 2009
(Figure 7.18). The share of traditional IRA owners who took withdrawals was down substantially
from the previous year’s survey, which found that 19 percent took withdrawals in tax year 2008. The
lower withdrawal rate in part can be attributed to the temporary suspension of required minimum
distributions (RMDs) during the 2009 tax year. An RMD is a distribution equal to a percentage of
the IRA account balance, with the percentage based on remaining life expectancy. Traditional IRA
owners aged 70½ or older must withdraw the minimum amount each year or pay a penalty for
failing to do so. Typically, withdrawals from traditional IRAs are taken to fulfill RMD requirements.
For example, 64 percent of individuals who took withdrawals in tax year 2008 stated they did so
to meet the RMD requirements. In fact, even though the rules were suspended in tax year 2009,
48 percent cited RMD requirements as the reason for their withdrawals.

Withdrawals from traditional IRAs were typically modest: the median withdrawal in tax year 2009
was $7,500 and 39 percent of withdrawals totaled less than $5,000 (Figure 7.18). The median ratio
of withdrawals to account balance was 8 percent.

FIGURE 7.18
Withdrawals from Traditional IRAs Are Infrequent

U.S. households with traditional IRAs in 2010 Amount withdrawn in tax year 2009
Percent Percentage of traditional IRA–owning households
that made withdrawals

19%
Less than $2,500
20%
$2,500 to $4,999
Retired, did not take a withdrawal1 24

Retired, took a withdrawal1, 2 11 29%

Not retired, took a withdrawal2 4 $20,000 or more
15%
$5,000 to $9,999

11%
Not retired, did not take a withdrawal 61 6% $10,000 to $14,999
$15,000 to $19,999

Mean: $18,500
Median: $7,500

1 The household was considered retired if either the head of household or spouse responded affirmatively to “are you retired
from your lifetime occupation?”
2 Households that no longer owned traditional IRAs were not included.

Source: ICI Fundamentals, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2010”

116 2011 INVESTMENT COMPANY FACT BOOK

Of the 15 percent of households who reported taking withdrawals in tax year 2009, 73 percent
reported that the head of household or the spouse or both were retired. Of retired households
that took traditional IRA withdrawals in tax year 2009, 50 percent reported using some or all of
the funds to pay for living expenses (Figure 7.19). Other uses included reinvesting or saving the
withdrawal amount in another account (28 percent), using the withdrawal for a healthcare expense
(16 percent), and using the withdrawal for a home purchase, repair, or remodeling (14 percent).

Because current withdrawal activity may not be a good indicator of future withdrawal activity,
ICI also asked about plans for future traditional IRA withdrawals. Among traditional IRA–owning
households in 2010 that did not take a withdrawal in tax-year 2009, 59 percent said that they were
not likely to take a withdrawal before age 70½. The top two expected future uses of traditional IRA
withdrawals were to pay for living expenses (mentioned by 67 percent of traditional IRA–owning
households in 2010 that did not take withdrawals in tax year 2009) and to pay for emergencies
(mentioned by 64 percent).

FIGURE 7.19
Traditional IRA Withdrawals Among Retirees Are Often Used to Pay for Living Expenses
Percentage of traditional IRA–owning households1 in which either the head of household or spouse
is retired, May 2010

Use of traditional IRA withdrawal in retirement 2

Took withdrawals to pay for living expenses 50
Spent it on a car, boat, or big-ticket item other than a home 6
Spent it on a healthcare expense 16
Used it for an emergency 9
Used it for home purchase, repair, or remodeling 14
Reinvested or saved it in another account 28
Paid for education 2
Some other use 11
1 The base of respondents includes the 11 percent of traditional IRA–owning households that were retired and took withdrawals
reported in Figure 7.18.
2 Multiple responses are included.

Source: ICI Fundamentals, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2010”

RETIREMENT AND EDUCATION SAVINGS 117

The Role of Mutual Funds in Households’ Retirement Savings
At year-end 2010, mutual funds accounted for $4.7 trillion, or 27 percent, of the $17.5 trillion
U.S. retirement market. The $4.7 trillion in mutual fund retirement assets represented
40 percent of all mutual fund assets at year-end 2010. Retirement savings accounts were a
significant portion of long-term mutual fund assets (48 percent), but were a relatively minor
share of money market fund assets (13 percent). Similarly, as a share of households’ mutual fund
holdings, mutual fund assets held in DC plans and IRAs represented 51 percent of household long-
term mutual funds, but only 19 percent of household money market funds (Figure 7.20).

Retirement assets invested in mutual funds primarily come from two sources: IRAs and employer-
sponsored DC plans, such as 401(k) plans. Investors held slightly more mutual fund assets in DC
plans than they held in IRAs. At year-end 2010, IRAs held $2.2 trillion in mutual fund assets, and
employer-sponsored DC plans had $2.5 trillion (Figure 7.21). Among DC plans, 401(k) plans were
the largest holder of mutual funds, with $1.8 trillion in assets. At year-end 2010, 403(b) plans
held $365 billion in mutual fund assets, 457 plans held $75 billion, and other DC plans held
$223 billion.

FIGURE 7.20
Households’ Mutual Fund Assets by Type of Account
Billions of dollars, year-end 2010

Other household accounts1

Variable annuities outside retirement accounts
IRAs
DC plans2
8,450

3,137

976

2,016

51% 1,824

2,321 1,440
33 206
145 19%
Households’ long-term mutual funds Households’ money market funds

1 Mutual funds held as investments in 529 plans and Coverdell ESAs are counted in this category.
2 DC plans include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans without 401(k) features.

118 2011 INVESTMENT COMPANY FACT BOOK

Types of Mutual Funds Used by Retirement Plan Investors
Fifty-nine percent of the $4.7 trillion in mutual fund retirement assets held in IRAs, 401(k)
plans, and other retirement accounts at year-end 2010 were invested in domestic or foreign equity
funds (Figure 7.21). By comparison, about 48 percent of overall fund industry assets—including
retirement and nonretirement accounts—were invested in domestic or foreign equity funds at
year-end 2010. Domestic equity funds alone constituted about $2.1 trillion, or 44 percent, of
mutual fund retirement assets.

At year-end 2010, 23 percent of mutual fund retirement assets were invested in bond funds and
money market funds. Bond funds held $710 billion, or 15 percent, of mutual fund retirement assets,
and money market funds accounted for $351 billion, or 7 percent. The remaining $878 billion, or
approximately 19 percent, of mutual fund retirement assets were held in hybrid funds, which invest
in a mix of equity, bond, and money market securities.

FIGURE 7.21
Bulk of Mutual Fund Retirement Account Assets Was Invested in Equities
Billions of dollars, year-end 2010

Equity
Money
Domestic Foreign Hybrid 1 Bond market Total
IRAs $942 $326 $372 $376 $206 $2,222
DC plans 1,132 349 506 334 145 2,466
401(k) plans 788 272 415 232 96 1,803
403(b) plans 222 35 52 35 22 365
457 plans 37 10 13 13 2 75
Other DC plans2 85 32 26 54 26 223
Total 2,074 675 878 710 351 4,687
1 Hybrid funds invest in a mix of equities and fixed-income securities. The bulk of target date and lifestyle funds is counted
in this category.
2 Other DC plans include Keoghs and other DC plans without 401(k) features.

Note: Components may not add to the total because of rounding.

RETIREMENT AND EDUCATION SAVINGS 119

Target Date and Lifestyle Mutual Funds
Target date and lifestyle mutual funds, generally included in the hybrid fund category, have grown
in popularity among investors and retirement plan sponsors over the past decade. As previously
described, a target date fund follows a predetermined reallocation of assets over time based on
a specified target retirement date, and typically the fund rebalances its portfolio to become less
focused on growth and more focused on income as it approaches and passes the target date, which
is usually indicated in the fund’s name. A lifestyle fund maintains a predetermined risk level and
generally uses words such as “conservative,” “moderate,” or “aggressive” in its name to indicate
the fund’s risk level. Assets in target date and lifestyle mutual funds totaled $604 billion at the end
of 2010 (Figure 7.22), up from $487 billion at year-end 2009. Target date mutual funds’ assets were
up 33 percent in 2010, increasing from $256 billion to $340 billion. Assets of lifestyle mutual
funds were up 14 percent in 2010, rising from $231 billion to $264 billion. The bulk (91 percent)
of target date mutual fund assets was held in retirement accounts, compared with 43 percent
of lifestyle mutual fund assets.

The Role of Mutual Funds in Households’ Education Savings

ICI research finds that 25 percent of households that owned mutual funds in 2010 cited education
as a financial goal for their fund investments. Nevertheless, the demand for education savings
vehicles has been historically modest since their introduction in the 1990s, partly because of their
limited availability and investors’ lack of familiarity with them. The enactment of the Economic
Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001 enhanced the attractiveness of both
Section 529 plans and Coverdell Education Savings Accounts (ESAs)—two education savings
vehicles—by allowing greater contributions and flexibility in the plans. The enactment of the
Pension Protection Act (PPA) in 2006 made permanent the EGTRRA enhancements to Section 529
plans. The enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation
Act of 2010 extended for two years the EGTRRA enhancements to Coverdell ESAs.

120 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.22
Target Date and Lifestyle Mutual Fund Assets by Account Type
Billions of dollars, year-end, 2000–2010

Other investors
IRAs
DC plans

Target date mutual funds1 340

30

256 65
18
48
183
13 160
38 9
115 31 245
7
25 189
71
5 131 119
44 15
26 2 3 83
1 1 9
9 1 12 2 15 2 5 51
6 9 11 2 19 31
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Lifestyle mutual funds2

264
238 231

189
176 151
126
132
131
98
98
85 65
52 55
56 40 48
46 37
31 33 35 26 26
12 6 11 7 13 7 10 15 51 60 51 58
24 39 41
12 15 14 20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 A target date mutual fund typically rebalances its portfolio to become less focused on growth and more focused on income
as it approaches and passes the target date of the fund, which is usually included in the fund’s name.
2 A lifestyle mutual fund maintains a predetermined risk level and generally contains “conservative,” “moderate,” or

“aggressive” in the fund’s name.

Note: Components may not add to the total because of rounding.

RETIREMENT AND EDUCATION SAVINGS 121

Assets in Section 529 savings plans increased 18 percent in 2010, with $138.2 billion in assets at
the end of 2010, up from $116.9 billion at year-end 2009 (Figure 7.23). As of year-end 2010, the
number of accounts was 9.5 million, and the average account size was approximately $14,500.

In 2010, as a group, households saving for college through 529 plans, Coverdell ESAs, or mutual
funds held outside of these accounts tended to be headed by younger individuals, with 57 percent
younger than 45 years of age (Figure 7.24). Heads of households saving for college had a range of
educational attainment: 49 percent had not completed college and 51 percent had college degrees
or higher education. In addition, these households represented a range of incomes: 40 percent had
household income less than $75,000; 18 percent earned between $75,000 and $99,999; and
42 percent had household incomes of $100,000 or more. Nearly 70 percent of these households
had children (younger than 18) in the home and 45 percent had more than one child in the home.

FIGURE 7.23
Section 529 Savings Plan Assets
Billions of dollars, year-end, 2000–2010

138.2
112.5 116.9
90.1 89.4
68.7
52.2
35.1
18.5
2.6 8.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Note: Data were estimated for a few individual state observations in order to construct a continuous time series.
Sources: Investment Company Institute, College Savings Plans Network, College Savings Foundation, and Financial Research
Corporation

122 2011 INVESTMENT COMPANY FACT BOOK

 FIGURE 7.24
Characteristics of Households Saving for College
Percentage of U.S. households saving for college, 1 May 2010

Age of head of household 2

Younger than 35 26
35 to 44 31
45 to 54 23
55 to 64 9
65 or older 11

Education level of head of household 2

High school graduate or less 16
Associate’s degree or some college 33
Completed college 23
Some graduate school or completed graduate school 28

Household income 3
Less than $25,000 6
$25,000 to $34,999 6
$35,000 to $49,999 10
$50,000 to $74,999 18
$75,000 to $99,999 18
$100,000 or more 42

Number of children in home 4

None 31
One 24
Two 29
Three or more 16
1 Households saving for college are households that own education savings plans (Coverdell ESAs or 529 plans) or responded
that paying for education was one of their financial goals for their mutual funds.
2 Head of household is the sole or co-decisionmaker for saving and investing.

3 Total reported is household income before taxes in 2009.

4 The number of children reported is children younger than 18 living in the home.

RETIREMENT AND EDUCATION SAVINGS 123

 For More Information
»» “The U.S. Retirement Market, Fourth Quarter 2010”
»» “Who Gets Retirement Plans and Why: An Update,” ICI Research Perspective
»» “The Role of IRAs in U.S. Households’ Saving for Retirement, 2010,” Investment Company
Institute Fundamentals
»» The IRA Investor Profile: Traditional IRA Investors’ Rollover Activity, 2007 and 2008
»» The IRA Investor Profile: Traditional IRA Investors’ Contribution Activity, 2007 and 2008
»» “The Evolving Role of IRAs in U.S. Retirement Planning,” Investment Company Institute
Perspective
»» Frequently Asked Questions About Individual Retirement Accounts
»» Commitment to Retirement Security: Investor Attitudes and Actions
»» “A Look at Private-Sector Retirement Plan Income After ERISA,” Investment Company
Institute Perspective
»» “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2009,” Investment
Company Institute Perspective
»» “The Economics of 401(k) Plans: Services, Fees, and Expenses, 2009,” Investment Company
Institute Fundamentals
»» Defined Contribution / 401(k) Fee Study: Inside the Structure of Defined Contribution/401(k)
Plan Fees: A Study Assessing the Mechanics of What Drives the “All-In” Fee
»» ICI Resources on Target Retirement Date Funds
Available at www.ici.org.

124 2011 INVESTMENT COMPANY FACT BOOK

Part Two

Data Tables
Data Tables

Section 1
U.S. Mutual Fund Totals
Table 1: Total Net Assets, Number of Funds, Number of Share Classes, and Number of Shareholder
Accounts of the U.S. Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
2: Total Sales, New Sales, Exchange Sales, Redemptions, and Exchange Redemptions of the U.S. Mutual Fund Industry. . . . . . . 129
3: Total Net Assets of the U.S. Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
4: Total Net Assets of the U.S. Mutual Fund Industry by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
5: Number of Funds of the U.S. Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
6: Number of Funds of the U.S. Mutual Fund Industry by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
7: Number of Share Classes of the U.S. Mutual Fund Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
8: Number of Share Classes of the U.S. Mutual Fund Industry by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
9: Number of Shareholder Accounts of the U.S. Mutual Fund Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
10: Number of Shareholder Accounts of the U.S. Mutual Fund Industry by Investment Classification . . . . . . . . . . . . . . . . . . . . . . 137

Section 2
Closed-End Funds, Exchange-Traded Funds, and Unit Investment Trusts
Table 11: Closed-End Funds: Total Net Assets and Proceeds from Issuance by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
12: Closed-End Funds: Number of Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13: Exchange-Traded Funds: Total Net Assets by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
14: Exchange-Traded Funds: Number of Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
15: Exchange-Traded Funds: Net Issuance by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
16: Unit Investment Trusts: Total Net Assets, Number of Trusts, and New Deposits by Type of Trust . . . . . . . . . . . . . . . . . . . . . . 143

Section 3
U.S. Long-Term Mutual Funds
Table 17: Liquid Assets and Liquidity Ratio of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
18: Liquidity Ratio of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
19: Net New Cash Flow of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
20: Net New Cash Flow and Components of Net New Cash Flow of Equity Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
21: Net New Cash Flow and Components of Net New Cash Flow of Hybrid Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
22: Net New Cash Flow and Components of Net New Cash Flow of Bond Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
23: Net New Cash Flow of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
24: New Sales of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
25: Exchange Sales of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
26: Redemptions of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
27: Exchange Redemptions of Long-Term Mutual Funds by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
28: Annual Redemption Rates of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
29: Portfolio Holdings of Long-Term Mutual Funds and Share of Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
30: Portfolio Holdings of Long-Term Mutual Funds as a Share of Total Net Assets by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . 157
31: Paid and Reinvested Dividends of Long-Term Mutual Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
32: Paid and Reinvested Capital Gains of Long-Term Mutual Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
33: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Long-Term Mutual Funds . . . 160
34: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Equity Mutual Funds . . . . . . . 161
35: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Hybrid Mutual Funds . . . . . . . 162
36: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Bond Mutual Funds . . . . . . . . 163

126 2011 INVESTMENT COMPANY FACT BOOK

Section 4
U.S. Money Market Funds
Table 37: Total Net Assets and Number of Shareholder Accounts of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . 164
38: Number of Funds and Number of Share Classes of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
39: Total Net Assets of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
40: Net New Cash Flow of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
41: Net New Cash Flow and Components of Net New Cash Flow of Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
42: Paid and Reinvested Dividends of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
43: Asset Composition of Taxable Government Money Market Funds as a Percentage of Total Net Assets . . . . . . . . . . . . . . . . . . 170
44: Asset Composition of Taxable Non-Government Money Market Funds as a Percentage of Total Net Assets . . . . . . . . . . . . . . 171

Section 5
Additional Categories of U.S. Mutual Funds
Table 45: Funds of Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . 172
46: Funds of Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
47: Index Mutual Funds: Total Net Assets and Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174
48: Index Mutual Funds: Number of Funds and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
49: Index Mutual Funds: New Sales and Exchange Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
50: Index Mutual Funds: Redemptions and Exchange Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
51: Lifestyle and Target Date Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and
Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
52: Lifestyle and Target Date Mutual Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
53: Retirement Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . 180
54: Retirement Mutual Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
55: Variable Annuity Mutual Funds: Total Net Assets, Net New Cash Flow, and Number of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 182
56: Variable Annuity Mutual Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Section 6
Institutional Investors in the U.S. Mutual Fund Industry
Table 57: Total Net Assets of Mutual Funds Held in Individual and Institutional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
58: Total Net Assets of Institutional Investors in Mutual Funds by Type of Institution and Type of Fund . . . . . . . . . . . . . . . . . . . . 185
59: Total Net Assets of Institutional Investors in Taxable Money Market Funds by Type of Institution and Type of Fund . . . . . . . . 186

Section 7
Worldwide Mutual Fund Totals
Table 60: Worldwide Total Net Assets of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
61: Worldwide Number of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
62: Worldwide Net Sales of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

DATA TABLES 127

 TABLE 1
Total Net Assets, Number of Funds, Number of Share Classes, and Number of Shareholder
Data Section 1

Accounts of the U.S. Mutual Fund Industry

Year-end
Total net assets Number of Number of shareholder accounts*
Year Billions of dollars Number of funds share classes Thousands
1940 $0.45 68 – 296
1945 1.28 73 – 498
1950 2.53 98 – 939
1955 7.84 125 – 2,085
1960 17.03 161 – 4,898
1965 35.22 170 – 6,709
1970 47.62 361 – 10,690
1975 45.87 426 – 9,876
1976 51.28 452 – 9,060
1977 48.94 477 – 8,693
1978 55.84 505 – 8,658
1979 94.51 526 – 9,790
1980 134.76 564 – 12,088
1981 241.37 665 – 17,499
1982 296.68 857 – 21,448
1983 292.99 1,026 – 24,605
1984 370.68 1,243 1,243 27,636
1985 495.39 1,528 1,528 34,098
1986 715.67 1,835 1,835 45,374
1987 769.17 2,312 2,312 53,717
1988 809.37 2,737 2,737 54,056
1989 980.67 2,935 2,935 57,560
1990 1,065.19 3,079 3,177 61,948
1991 1,393.19 3,403 3,587 68,332
1992 1,642.54 3,824 4,208 79,931
1993 2,069.96 4,534 5,562 94,015
1994 2,155.32 5,325 7,697 114,383
1995 2,811.29 5,725 9,007 131,219
1996 3,525.80 6,248 10,352 149,933
1997 4,468.20 6,684 12,002 170,299
1998 5,525.21 7,314 13,720 194,029
1999 6,846.34 7,791 15,262 226,212
2000 6,964.63 8,155 16,738 244,705
2001 6,974.91 8,305 18,023 248,701
2002 6,383.48 8,243 18,984 251,123
2003 7,402.42 8,125 19,318 260,698
2004 8,095.08 8,040 20,029 269,468
2005 8,891.11 7,974 20,549 275,479
2006 10,397.94 8,118 21,257 288,596
2007 12,002.28 8,027 21,621 292,590
2008 9,603.60 8,022 22,237 264,599
2009 11,120.20 7,685 21,716 269,224
2010 11,820.68 7,581 21,971 292,109
* Number of shareholder accounts includes a mix of individual and omnibus accounts.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

128 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 2
Total Sales, New Sales, Exchange Sales, Redemptions, and Exchange Redemptions

Data Section 1
of the U.S. Mutual Fund Industry
Billions of dollars, annual
Exchange
Year Total sales 1 New sales Exchange sales 2 Redemptions redemptions 3
1945 $0.29 – – $0.11 –
1950 0.52 – – 0.28 –
1955 1.21 – – 0.44 –
1960 2.10 – – 0.84 –
1965 4.36 $3.93 – 1.96 –
1970 4.63 3.84 – 2.99 –
1975 10.06 8.94 – 9.57 –
1976 13.72 11.92 $1.52 16.41 $1.44
1977 17.07 14.75 2.24 16.69 2.31
1978 37.16 35.40 3.97 31.53 3.94
1979 119.32 115.66 5.83 86.74 5.89
1980 247.42 238.96 10.10 216.08 9.94
1981 472.13 452.42 14.44 362.44 14.59
1982 626.94 604.09 28.25 588.35 27.86
1983 547.77 532.04 35.67 565.83 36.03
1984 680.12 661.74 36.66 607.02 37.11
1985 953.85 933.37 46.55 864.88 46.84
1986 1,204.90 1,179.40 107.75 1,015.64 107.96
1987 1,251.19 1,220.27 205.68 1,178.75 207.35
1988 1,176.81 1,143.62 134.28 1,166.67 134.24
1989 1,444.84 1,401.21 130.66 1,327.05 131.95
1990 1,564.81 1,517.41 138.79 1,470.83 140.98
1991 2,037.64 1,990.53 155.75 1,879.69 154.31
1992 2,749.68 2,704.69 197.43 2,548.28 198.15
1993 3,187.49 3,137.76 248.79 2,904.44 253.95
1994 3,075.63 3,019.76 317.55 2,928.62 325.00
1995 3,600.62 3,526.00 351.53 3,314.86 351.08
1996 4,671.44 4,586.71 504.73 4,266.20 503.94
1997 5,801.23 5,704.83 613.44 5,324.29 618.49
1998 7,230.40 7,126.92 742.97 6,649.27 743.37
1999 9,043.58 8,922.96 949.96 8,562.10 947.36
2000 11,109.54 10,970.50 1,149.75 10,586.59 1,145.42
2001 12,866.21 12,747.53 797.34 12,242.32 798.08
2002 13,168.76 13,084.32 747.34 13,011.36 745.65
2003 12,393.72 12,315.54 572.50 12,361.83 573.76
2004 12,176.96 12,086.82 408.99 12,024.72 417.95
2005 13,939.25 13,812.42 420.83 13,546.66 432.43
2006 17,409.60 17,229.04 487.71 16,752.22 492.19
2007 23,471.88 23,237.64 606.46 22,353.77 611.96
2008 26,346.81 26,133.01 733.84 25,725.92 728.84
2009 20,681.89 20,530.39 529.96 20,681.38 528.12
2010 18,193.46 18,036.65 420.04 18,318.76 434.77
1 Total sales are the dollar value of new sales plus sales made through reinvestment of income dividends from existing accounts,
but exclude reinvestment of capital gains distributions.
2 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
3 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same

fund group.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

U.S. MUTUAL FUND TOTALS 129

 TABLE 3
Total Net Assets of the U.S. Mutual Fund Industry
Data Section 1

Billions of dollars, year-end

Long-term funds
Money market
Year Total Equity funds Bond and income funds funds
1960 $17.03 $16.00 $1.02 –
1965 35.22 32.76 2.46 –
1970 47.62 45.13 2.49 –
1975 45.87 37.49 4.68 $3.70
1976 51.28 39.19 8.39 3.69
1977 48.94 34.07 10.98 3.89
1978 55.84 32.67 12.31 10.86
1979 94.51 35.88 13.10 45.53
1980 134.76 44.42 13.98 76.36
1981 241.37 41.19 14.01 186.16
1982 296.68 53.63 23.21 219.84
1983 292.99 76.97 36.63 179.39
Long-term funds
Money market
Year Total Equity funds Hybrid funds Bond funds funds
1984 $370.68 $79.73 $11.15 $46.24 $233.55
1985 495.39 111.33 17.61 122.65 243.80
1986 715.67 154.45 25.76 243.31 292.15
1987 769.17 175.45 29.25 248.37 316.10
1988 809.37 189.38 26.35 255.69 337.95
1989 980.67 245.04 35.64 271.90 428.09
1990 1,065.19 239.48 36.12 291.25 498.34
1991 1,393.19 404.73 52.23 393.78 542.44
1992 1,642.54 514.09 78.04 504.21 546.19
1993 2,069.96 740.67 144.50 619.48 565.32
1994 2,155.32 852.76 164.40 527.15 611.00
1995 2,811.29 1,249.08 210.33 598.87 753.02
1996 3,525.80 1,726.01 252.58 645.41 901.81
1997 4,468.20 2,368.02 317.11 724.18 1,058.89
1998 5,525.21 2,977.94 365.00 830.59 1,351.68
1999 6,846.34 4,041.89 378.81 812.49 1,613.15
2000 6,964.63 3,961.92 346.28 811.19 1,845.25
2001 6,974.91 3,419.61 344.87 925.12 2,285.31
2002 6,383.48 2,664.01 323.95 1,130.45 2,265.08
2003 7,402.42 3,686.30 428.33 1,247.77 2,040.02
2004 8,095.08 4,386.67 516.60 1,290.48 1,901.34
2005 8,891.11 4,942.65 564.35 1,357.28 2,026.82
2006 10,397.94 5,914.10 650.31 1,495.07 2,338.45
2007 12,002.28 6,518.76 716.73 1,681.03 3,085.76
2008 9,603.60 3,705.55 498.28 1,567.54 3,832.24
2009 11,120.20 4,957.04 639.15 2,208.11 3,315.89
2010 11,820.68 5,667.40 741.07 2,608.29 2,803.92
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
The data contain a series break beginning in 1984. All funds were reclassified in 1984, and a separate category was created for
hybrid funds.
Components may not add to the total because of rounding.

130 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 4
Total Net Assets of the U.S. Mutual Fund Industry by Investment Classification
Billions of dollars, year-end
MONEY MARKET
EQUITY FUNDS BOND FUNDS FUNDS
Capital HYBRID Strategic National Tax-

U.S. MUTUAL FUND TOTALS

Year appreciation World Total return FUNDS Corporate High yield World Government income State muni muni Taxable exempt
1986 $70.53 $15.47 $68.45 $25.76 $9.08 $24.59 $0.52 $122.06 $11.37 $25.81 $49.86 $228.35 $63.81
1987 79.31 17.43 78.71 29.25 9.47 24.16 2.14 123.11 12.53 27.79 49.17 254.68 61.42
1988 83.09 17.98 88.31 26.35 10.46 33.43 3.02 111.40 10.65 32.41 54.32 272.20 65.76
1989 107.23 23.59 114.22 35.64 11.68 28.49 3.06 109.60 13.41 41.21 64.45 358.62 69.47
1990 113.37 28.30 97.81 36.12 25.80 19.15 13.02 104.43 8.61 49.55 70.70 414.56 83.78
1991 178.73 39.52 186.48 52.23 36.60 26.33 27.71 134.24 14.70 65.81 88.39 452.46 89.98
1992 235.06 45.68 233.34 78.04 48.16 34.47 31.02 172.68 21.63 85.48 110.78 451.35 94.84
1993 321.18 114.13 305.36 144.50 68.29 48.97 32.91 188.67 26.05 113.59 141.01 461.88 103.44
1994 361.62 161.19 329.95 164.40 64.78 45.08 23.60 140.44 25.95 104.82 122.49 501.11 109.89
1995 572.34 196.51 480.23 210.33 84.75 59.70 24.83 143.00 33.30 117.30 135.99 631.32 121.69
1996 781.72 285.20 659.10 252.58 100.61 78.90 25.74 130.63 56.47 116.96 136.10 763.94 137.87
1997 1,075.27 346.37 946.39 317.11 119.35 104.91 25.99 128.89 73.15 126.54 145.35 901.23 157.66
1998 1,404.71 391.64 1,181.59 365.00 143.51 117.44 24.64 144.35 102.05 139.96 158.63 1,166.97 184.71
1999 2,115.06 585.25 1,341.58 378.81 157.68 116.90 22.94 138.58 104.90 127.89 143.59 1,413.25 199.90
2000 2,144.63 551.76 1,265.54 346.28 140.64 90.28 19.94 133.34 149.15 132.72 145.12 1,611.38 233.87
2001 1,791.27 434.88 1,193.46 344.87 160.97 94.28 19.07 164.24 191.55 140.99 154.03 2,026.23 259.08
2002 1,337.99 360.76 965.25 323.95 179.42 100.40 21.08 233.50 267.53 154.14 174.38 1,988.78 276.30
2003 1,854.91 519.40 1,312.00 428.33 201.12 153.98 27.19 219.94 311.42 150.94 183.16 1,749.73 290.29
2004 2,154.53 692.39 1,539.74 516.60 224.63 155.93 36.35 205.64 340.21 145.10 182.62 1,589.34 312.00
2005 2,374.97 921.70 1,645.98 564.35 239.79 144.17 44.72 201.37 388.47 148.14 190.61 1,690.45 336.37
2006 2,697.78 1,315.25 1,901.07 650.31 272.17 156.50 62.70 186.61 452.20 154.87 210.03 1,969.42 369.03
2007 2,888.80 1,668.20 1,961.76 716.73 299.78 156.97 88.35 195.03 567.07 155.63 218.21 2,617.67 468.09
2008 1,648.45 866.44 1,190.65 498.28 246.08 111.58 88.42 226.17 557.58 134.87 202.84 3,338.56 493.68
2009 2,214.03 1,273.12 1,469.90 639.15 357.42 187.55 125.67 271.10 809.23 158.96 298.18 2,916.96 398.94
2010 2,544.67 1,502.04 1,620.70 741.07 437.62 218.63 192.15 299.38 987.06 155.82 317.63 2,473.92 330.01
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

131
Data Section 1
 TABLE 5
Number of Funds of the U.S. Mutual Fund Industry
Data Section 1

Year-end
Long-term funds
Money market
Year Total Equity funds Bond and income funds funds
1970 361 323 38 –
1971 392 350 42 –
1972 410 364 46 –
1973 421 366 55 –
1974 431 343 73 15
1975 426 314 76 36
1976 452 302 102 48
1977 477 296 131 50
1978 505 294 150 61
1979 526 289 159 78
1980 564 288 170 106
1981 665 306 180 179
1982 857 340 199 318
1983 1,026 396 257 373
Long-term funds
Money market
Year Total Equity funds Hybrid funds Bond funds funds
1984 1,243 459 89 270 425
1985 1,528 562 103 403 460
1986 1,835 678 121 549 487
1987 2,312 824 164 781 543
1988 2,737 1,006 179 942 610
1989 2,935 1,069 189 1,004 673
1990 3,079 1,099 193 1,046 741
1991 3,403 1,191 212 1,180 820
1992 3,824 1,325 235 1,400 864
1993 4,534 1,586 282 1,746 920
1994 5,325 1,886 361 2,115 963
1995 5,725 2,139 412 2,177 997
1996 6,248 2,570 466 2,224 988
1997 6,684 2,951 501 2,219 1,013
1998 7,314 3,512 526 2,250 1,026
1999 7,791 3,952 532 2,262 1,045
2000 8,155 4,385 523 2,208 1,039
2001 8,305 4,717 482 2,091 1,015
2002 8,243 4,748 472 2,035 988
2003 8,125 4,600 507 2,045 973
2004 8,040 4,547 509 2,042 942
2005 7,974 4,586 504 2,014 870
2006 8,118 4,769 507 1,995 847
2007 8,027 4,764 488 1,970 805
2008 8,022 4,827 492 1,920 783
2009 7,685 4,653 471 1,857 704
2010 7,581 4,585 478 1,866 652
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
The data contain a series break beginning in 1984. All funds were reclassified in 1984, and a separate category was created for
hybrid funds.

132 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 6
Number of Funds of the U.S. Mutual Fund Industry by Investment Classification
Year-end
MONEY MARKET
EQUITY FUNDS BOND FUNDS FUNDS
Capital HYBRID Strategic National Tax-

U.S. MUTUAL FUND TOTALS

Year appreciation World Total return FUNDS Corporate High yield World Government income State muni muni Taxable exempt
1986 439 57 182 121 35 57 4 139 67 122 125 360 127
1987 514 81 229 164 42 70 16 201 86 217 149 389 154
1988 578 109 319 179 58 103 28 248 85 245 175 433 177
1989 597 128 344 189 59 105 30 266 101 260 183 470 203
1990 621 155 323 193 120 106 41 252 64 272 191 505 236
1991 645 206 340 212 144 95 61 281 76 331 192 552 268
1992 717 239 369 235 183 89 89 335 76 414 214 585 279
1993 850 306 430 282 251 90 115 405 89 531 265 627 293
1994 994 423 469 361 304 95 138 457 109 707 305 649 314
1995 1,110 528 501 412 358 104 159 429 116 710 301 676 321
1996 1,325 668 577 466 386 119 173 422 143 686 295 669 319
1997 1,538 768 645 501 372 134 186 407 187 649 284 685 328
1998 1,894 890 728 526 350 183 188 395 234 615 285 687 339
1999 2,208 950 794 532 336 208 175 374 282 605 282 704 341
2000 2,541 1,006 838 523 305 214 144 351 326 594 274 704 335
2001 2,852 1,015 850 482 293 211 131 320 323 556 257 690 325
2002 2,955 947 846 472 298 200 116 314 338 519 250 677 311
2003 2,930 863 807 507 291 199 105 315 357 527 251 660 313
2004 2,934 820 793 509 301 199 106 313 357 516 250 637 305
2005 2,968 839 779 504 294 208 105 307 361 501 238 593 277
2006 3,068 915 786 507 289 208 114 309 364 481 230 573 274
2007 3,017 980 767 488 292 207 124 301 372 449 225 545 260
2008 3,018 1,060 749 492 281 196 131 294 381 417 220 534 249
2009 2,822 1,115 716 471 275 187 135 297 366 378 219 476 228
2010 2,750 1,143 692 478 277 187 155 291 375 361 220 442 210
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

133
Data Section 1
 TABLE 7
Number of Share Classes of the U.S. Mutual Fund Industry
Data Section 1

Year-end
Money market
Year Total Equity funds Hybrid funds Bond funds funds
1986 1,835 678 121 549 487
1987 2,312 824 164 781 543
1988 2,737 1,006 179 942 610
1989 2,935 1,069 189 1,004 673
1990 3,177 1,128 200 1,087 762
1991 3,587 1,248 224 1,244 871
1992 4,208 1,452 258 1,584 914
1993 5,562 1,945 349 2,259 1,009
1994 7,697 2,656 517 3,263 1,261
1995 9,007 3,287 637 3,703 1,380
1996 10,352 4,211 753 3,935 1,453
1997 12,002 5,309 877 4,267 1,549
1998 13,720 6,642 968 4,483 1,627
1999 15,262 7,785 1,031 4,716 1,730
2000 16,738 9,079 1,024 4,780 1,855
2001 18,023 10,326 996 4,753 1,948
2002 18,984 11,005 1,043 4,930 2,006
2003 19,318 10,956 1,172 5,159 2,031
2004 20,029 11,398 1,271 5,314 2,046
2005 20,549 11,824 1,371 5,323 2,031
2006 21,257 12,509 1,355 5,381 2,012
2007 21,621 12,827 1,338 5,438 2,018
2008 22,237 13,391 1,382 5,476 1,988
2009 21,716 13,095 1,350 5,422 1,849
2010 21,971 13,130 1,422 5,636 1,783
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

134 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 8
Number of Share Classes of the U.S. Mutual Fund Industry by Investment Classification
Year-end
MONEY MARKET
EQUITY FUNDS BOND FUNDS FUNDS
Capital HYBRID Strategic National Tax-

U.S. MUTUAL FUND TOTALS

Year appreciation World Total return FUNDS Corporate High yield World Government income State muni muni Taxable exempt
1986 439 57 182 121 35 57 4 139 67 122 125 360 127
1987 514 81 229 164 42 70 16 201 86 217 149 389 154
1988 578 109 319 179 58 103 28 248 85 245 175 433 177
1989 597 128 344 189 59 105 30 266 101 260 183 470 203
1990 632 166 330 200 121 109 45 258 64 291 199 522 240
1991 666 227 355 224 146 100 70 293 77 352 206 591 280
1992 785 263 404 258 201 100 111 382 82 466 242 616 298
1993 1,033 385 527 349 307 115 152 522 109 708 346 672 337
1994 1,362 630 664 517 434 135 205 679 150 1,187 473 858 403
1995 1,660 845 782 637 557 172 248 697 167 1,341 521 953 427
1996 2,099 1,155 957 753 637 202 289 711 207 1,352 537 1,005 448
1997 2,704 1,449 1,156 877 647 264 335 743 300 1,415 563 1,075 474
1998 3,464 1,770 1,408 968 648 378 348 762 392 1,365 590 1,137 490
1999 4,231 1,969 1,585 1,031 669 452 334 760 503 1,380 618 1,230 500
2000 5,163 2,207 1,709 1,024 655 479 287 731 601 1,407 620 1,331 524
2001 6,155 2,375 1,796 996 682 491 271 698 655 1,342 614 1,405 543
2002 6,757 2,342 1,906 1,043 729 498 270 732 763 1,297 641 1,463 543
2003 6,823 2,199 1,934 1,172 753 507 254 766 842 1,344 693 1,462 569
2004 7,218 2,177 2,003 1,271 801 528 260 797 881 1,340 707 1,470 576
2005 7,505 2,287 2,032 1,371 809 557 268 794 906 1,314 675 1,464 567
2006 7,902 2,555 2,052 1,355 837 567 299 796 947 1,268 667 1,454 558
2007 7,941 2,808 2,078 1,338 871 597 337 783 963 1,223 664 1,448 570
2008 8,112 3,166 2,113 1,382 890 589 387 782 1,002 1,157 669 1,445 543
2009 7,682 3,373 2,040 1,350 868 572 426 803 1,003 1,071 679 1,332 517
2010 7,563 3,551 2,016 1,422 892 594 513 828 1,042 1,064 703 1,283 500
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

135
Data Section 1
 TABLE 9
Number of Shareholder Accounts* of the U.S. Mutual Fund Industry
Data Section 1

Thousands, year-end
Long-term funds
Money market
Year Total Equity funds Hybrid funds Bond funds funds
1986 45,374 15,509 2,101 11,450 16,313
1987 53,717 20,371 2,732 12,939 17,675
1988 54,056 19,658 2,575 13,253 18,570
1989 57,560 20,348 2,727 13,170 21,314
1990 61,948 22,157 3,203 13,619 22,969
1991 68,332 25,648 3,620 15,509 23,556
1992 79,931 32,730 4,532 19,023 23,647
1993 94,015 42,554 6,741 21,135 23,585
1994 114,383 57,948 10,251 20,806 25,379
1995 131,219 69,340 10,926 20,816 30,137
1996 149,933 85,301 12,026 20,406 32,200
1997 170,299 101,679 12,856 20,140 35,624
1998 194,029 119,557 14,138 21,486 38,847
1999 226,212 147,391 14,252 20,953 43,616
2000 244,705 163,948 13,066 19,553 48,138
2001 248,701 165,649 14,257 21,560 47,236
2002 251,123 164,295 15,579 25,869 45,380
2003 260,698 174,060 17,672 27,752 41,214
2004 269,468 183,241 20,004 28,587 37,636
2005 275,479 187,990 21,206 29,446 36,837
2006 288,596 200,020 21,967 29,541 37,067
2007 292,590 201,293 22,338 29,830 39,130
2008 264,599 175,634 20,753 30,100 38,111
2009 269,224 177,511 21,610 36,637 33,466
2010 292,109 188,858 22,828 49,816 30,606
* Number of shareholder accounts includes a mix of individual and omnibus accounts.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

136 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 10
Number of Shareholder Accounts* of the U.S. Mutual Fund Industry by Investment Classification
Thousands, year-end
EQUITY FUNDS BOND FUNDS MONEY MARKET FUNDS
Capital HYBRID Strategic National
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni muni Taxable Tax-exempt

U.S. MUTUAL FUND TOTALS

1986 8,240 1,631 5,638 2,101 659 1,744 47 5,985 603 722 1,691 15,654 660
1987 10,557 2,171 7,644 2,732 708 1,974 156 6,666 694 874 1,866 16,833 842
1988 10,312 2,034 7,312 2,575 772 2,488 255 6,293 508 1,000 1,938 17,631 939
1989 10,172 2,062 8,114 2,727 810 2,409 237 5,847 584 1,147 2,138 20,173 1,141
1990 11,427 3,077 7,653 3,203 1,389 2,204 680 5,394 310 1,323 2,318 21,578 1,391
1991 13,628 3,478 8,542 3,620 1,678 1,992 1,306 5,846 432 1,631 2,624 21,863 1,693
1992 17,842 4,203 10,685 4,532 2,073 2,041 1,725 7,181 799 2,163 3,041 21,771 1,876
1993 22,003 7,122 13,430 6,741 2,463 2,373 1,878 7,226 977 2,579 3,639 21,587 1,999
1994 28,407 12,162 17,379 10,251 2,849 2,440 1,435 6,359 1,010 3,232 3,482 23,342 2,037
1995 35,758 13,195 20,387 10,926 3,160 2,816 1,283 6,395 1,132 2,621 3,409 27,866 2,271
1996 44,731 15,651 24,919 12,026 3,632 3,189 1,214 5,559 1,152 2,473 3,187 29,929 2,271
1997 53,101 17,912 30,666 12,856 3,722 3,756 1,116 4,918 1,344 2,289 2,995 32,986 2,638
1998 63,288 18,515 37,754 14,138 4,333 4,168 844 4,984 1,651 2,487 3,020 36,461 2,386
1999 83,170 21,833 42,388 14,252 4,760 4,110 783 4,871 1,448 2,228 2,754 41,187 2,428
2000 99,310 23,514 41,124 13,066 3,892 3,532 657 4,539 2,240 2,120 2,573 45,489 2,649
2001 99,381 22,628 43,639 14,257 4,813 3,605 632 5,120 2,822 2,044 2,524 44,425 2,811
2002 97,939 22,365 43,991 15,579 5,523 3,818 713 6,360 4,759 2,060 2,636 42,725 2,655
2003 102,135 24,341 47,585 17,672 5,529 4,783 897 6,186 5,957 1,841 2,559 38,411 2,803
2004 103,812 29,510 49,919 20,004 5,966 4,784 1,038 5,891 6,677 1,744 2,487 34,793 2,843
2005 101,856 35,550 50,584 21,206 6,369 4,626 1,355 5,438 7,468 1,713 2,476 34,031 2,806
2006 103,710 44,591 51,720 21,967 6,184 4,700 1,742 4,552 8,197 1,647 2,519 34,004 3,063
2007 100,787 49,862 50,643 22,338 5,936 4,711 2,140 4,072 8,930 1,575 2,466 35,661 3,469
2008 85,996 44,071 45,568 20,753 5,175 4,106 2,549 4,894 9,631 1,375 2,370 34,497 3,614
2009 86,580 47,200 43,731 21,610 6,840 4,802 3,256 5,172 12,361 1,424 2,784 30,300 3,166
2010 91,378 51,610 45,870 22,828 11,653 6,334 4,549 5,892 16,749 1,490 3,149 27,435 3,171
* Number of shareholder accounts includes a mix of individual and omnibus accounts.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

137
Data Section 1
 TABLE 11
Closed-End Funds: Total Net Assets and Proceeds from Issuance by Type of Fund
Millions of dollars
Equity funds Bond funds
Total Global/ Total Domestic Domestic Global/
Year Total equity Domestic International bond taxable municipal International
Total net assets
Year-end
1990 $59,106 $16,634 $10,791 $5,843 $42,472 $16,820 $16,482 $9,170
Data Section 2

1991 76,164 19,296 13,109 6,187 56,868 19,403 29,519 7,947

1992 100,666 21,766 14,581 7,185 78,900 24,632 45,593 8,674
1993 131,520 28,010 15,462 12,548 103,510 30,909 60,100 12,501
1994 130,675 37,611 16,018 21,594 93,063 26,604 56,035 10,425
1995 142,619 41,926 18,078 23,848 100,694 28,678 60,318 11,698
1996 146,991 46,987 19,830 27,157 100,004 28,418 59,540 12,046
1997 151,845 49,625 20,536 29,089 102,220 28,315 61,992 11,912
1998 155,814 47,606 22,529 25,077 108,208 34,127 63,628 10,454
1999 147,016 41,267 24,696 16,571 105,749 30,888 64,513 10,348
2000 143,134 36,611 24,557 12,054 106,523 28,581 68,266 9,676
2001 141,251 31,075 22,261 8,814 110,176 26,606 74,467 9,102
2002 158,805 33,724 26,596 7,128 125,081 25,643 90,024 9,414
2003 214,088 53,019 42,987 10,032 161,069 55,428 94,102 11,539
2004 254,296 82,327 63,762 18,565 171,969 64,230 94,884 12,855
2005 277,017 105,588 77,124 28,464 171,430 64,119 94,606 12,705
2006 298,328 122,477 87,772 34,705 175,851 68,051 94,569 13,231
2007 313,099 146,174 87,569 58,604 166,926 62,281 88,963 15,682
2008 185,983 74,288 45,777 28,511 111,695 32,997 67,807 10,891
2009 225,000 90,086 52,309 37,777 134,914 43,189 78,065 13,660
2010 240,782 100,803 59,600 41,203 139,979 48,481 76,551 14,947
Proceeds from issuance*
Annual
2002 $24,911 $9,210 $9,191 $18 $15,701 $2,309 $13,392 $0
2003 40,963 11,349 11,187 161 29,614 25,587 2,995 1,032
2004 27,867 21,225 15,424 5,801 6,642 5,608 5 1,028
2005 21,266 19,187 12,559 6,628 2,080 1,924 31 124
2006 12,333 10,275 7,692 2,583 2,057 1,528 196 334
2007 31,193 25,844 5,973 19,871 5,349 2,221 433 2,695
2008 330 208 8 200 121 121 0 0
2009 3,900 1,652 476 1,176 2,248 876 1,055 317
2010 8,291 3,643 3,628 13 4,648 2,323 1,968 358
* Data are not available for years prior to 2002. The data include proceeds from the issuance of initial and additional public offerings of
closed-end fund shares.
Note: Components may not add to the total because of rounding.

138 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 12
Closed-End Funds: Number of Funds by Type of Fund
Year-end
Equity funds Bond funds
Total Global/ Total Domestic Domestic Global/
Year Total equity Domestic International bond taxable municipal International
1990 249 93 41 52 156 85 53 18
1991 281 93 40 53 188 86 87 15
1992 373 105 43 62 268 99 149 20

Data Section 2
1993 495 119 48 71 376 120 227 29
1994 511 137 50 87 374 123 219 32
1995 500 141 49 92 359 119 207 33
1996 497 142 50 92 355 118 205 32
1997 487 135 45 90 352 115 205 32
1998 492 128 44 84 364 123 211 30
1999 512 124 49 75 388 117 241 30
2000 482 123 53 70 359 109 220 30
2001 492 116 51 65 376 109 240 27
2002 545 123 63 60 422 105 292 25
2003 584 131 75 56 453 129 297 27
2004 619 158 96 62 461 136 295 30
2005 635 193 121 72 442 131 280 31
2006 647 204 129 75 443 134 276 33
2007 664 230 137 93 434 131 269 34
2008 643 222 128 94 421 128 260 33
2009 628 209 117 92 419 127 260 32
2010 624 204 116 88 420 130 258 32

CLOSED-END FUNDS, EXCHANGE-TRADED FUNDS, AND UNIT INVESTMENT TRUSTS 139

 Data Section 2

140
TABLE 13
Exchange-Traded Funds: Total Net Assets by Type of Fund
Millions of dollars, year-end
INVESTMENT OBJECTIVE LEGAL STATUS
Equity Registered Memo
Domestic equity
Global/ Actively Funds of
Year Total Broad-based Sector 1 International Commodities 2 Hybrid Bond Index managed Nonregistered 2 funds 3
1993 $464 $464 – – – – – $464 – – –
1994 424 424 – – – – – 424 – – –
1995 1,052 1,052 – – – – – 1,052 – – –
1996 2,411 2,159 – $252 – – – 2,411 – – –
1997 6,707 6,200 – 506 – – – 6,707 – – –
1998 15,568 14,058 $484 1,026 – – – 15,568 – – –
1999 33,873 29,374 2,507 1,992 – – – 33,873 – – –
2000 65,585 60,529 3,015 2,041 – – – 65,585 – – –
2001 82,993 74,752 5,224 3,016 – – – 82,993 – – –
2002 102,143 86,985 5,919 5,324 – – $3,915 102,143 – – –
2003 150,983 120,430 11,901 13,984 – – 4,667 150,983 – – –
2004 227,540 163,730 20,315 33,644 $1,335 – 8,516 226,205 – $1,335 –
2005 300,820 186,832 28,975 65,210 4,798 – 15,004 296,022 – 4,798 –
2006 422,550 232,487 43,655 111,194 14,699 – 20,514 407,850 – 14,699 –
2007 608,422 300,930 64,117 179,702 28,906 $119 34,648 579,517 – 28,906 –
2008 531,288 266,161 58,374 113,684 35,728 132 57,209 495,314 $245 35,728 $97
2009 777,128 304,044 82,073 209,315 74,508 169 107,018 701,586 1,014 74,528 824
2010 991,989 372,377 103,807 276,622 101,081 322 137,781 888,198 2,710 101,081 1,294
1 This category includes funds both registered and not registered under the Investment Company Act of 1940.
2 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment Company Act of 1940.
3 Data for ETFs that invest primarily in other ETFs are excluded from the totals.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute and Strategic Insight Simfund

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 14
Exchange-Traded Funds: Number of Funds by Type of Fund
Year–end
INVESTMENT OBJECTIVE LEGAL STATUS
Equity Registered Memo
Domestic equity
Global/ Actively Funds of
Year Total Broad–based Sector 1 International Commodities 2 Hybrid Bond Index managed Nonregistered 2 funds 3
1993 1 1 – – – – – 1 – – –
1994 1 1 – – – – – 1 – – –
1995 2 2 – – – – – 2 – – –
1996 19 2 – 17 – – – 19 – – –
1997 19 2 – 17 – – – 19 – – –
1998 29 3 9 17 – – – 29 – – –
1999 30 4 9 17 – – – 30 – – –
2000 80 29 26 25 – – – 80 – – –
2001 102 34 34 34 – – – 102 – – –
2002 113 34 32 39 – – 8 113 – – –
2003 119 39 33 41 – – 6 119 – – –
2004 152 60 42 43 1 – 6 151 – 1 –
2005 204 81 65 49 3 – 6 201 – 3 –

CLOSED-END FUNDS, EXCHANGE-TRADED FUNDS, AND UNIT INVESTMENT TRUSTS

2006 359 133 119 85 16 – 6 343 – 16 –
2007 629 197 191 159 28 5 49 601 – 28 –
2008 728 204 186 225 45 6 62 670 13 45 15
2009 797 222 181 244 47 5 98 727 21 49 23
2010 923 243 193 298 55 6 128 844 24 55 27
1 This category includes funds both registered and not registered under the Investment Company Act of 1940.
2 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment Company Act of 1940.
3 Data for ETFs that invest primarily in other ETFs are excluded from the totals.

Sources: Investment Company Institute and Strategic Insight Simfund

141
Data Section 2
 Data Section 2

142
TABLE 15
Exchange-Traded Funds: Net Issuance by Type of Fund
Millions of dollars, annual
INVESTMENT OBJECTIVE LEGAL STATUS
Equity Registered Memo
Domestic equity
Global/ Actively Funds of
Year Total Broad–based Sector 1 International Commodities 2 Hybrid Bond Index managed Nonregistered 2 funds 3
1993 $442 $442 – – – – – $442 – – –
1994 -28 -28 – – – – – -28 – – –
1995 443 443 – – – – – 443 – – –
1996 1,108 842 – $266 – – – 1,108 – – –
1997 3,466 3,160 – 306 – – – 3,466 – – –
1998 6,195 5,158 $484 553 – – – 6,195 – – –
1999 11,929 10,221 1,596 112 – – – 11,929 – – –
2000 42,508 40,591 1,033 884 – – – 42,508 – – –
2001 31,012 26,911 2,735 1,366 – – – 31,012 – – –
2002 45,302 35,477 2,304 3,792 – – $3,729 45,302 – – –
2003 15,810 5,737 3,587 5,764 – – 721 15,810 – – –
2004 56,375 29,084 6,514 15,645 $1,353 – 3,778 55,021 – $1,353 –
2005 56,729 16,941 6,719 23,455 2,859 – 6,756 53,871 – 2,859 –
2006 73,995 21,589 9,780 28,423 8,475 – 5,729 65,520 – 8,475 –
2007 150,617 61,152 18,122 48,842 9,062 $122 13,318 141,555 – 9,062 –
2008 177,220 88,105 30,296 25,243 10,567 58 22,952 166,372 $281 10,567 $107
2009 116,469 -11,842 14,350 39,599 28,388 15 45,958 87,336 724 28,410 237
2010 117,978 28,317 10,167 41,523 8,175 144 29,652 108,137 1,686 8,155 433
1 This category includes funds both registered and not registered under the Investment Company Act of 1940.
2 The funds in this category invest primarily in commodities, currency, and futures, and are not registered under the Investment Company Act of 1940.
3 Data for ETFs that invest primarily in other ETFs are excluded from the totals.

Note: Components may not add to the total because of rounding.

Sources: Investment Company Institute and Strategic Insight Simfund

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 16
Unit Investment Trusts: Total Net Assets, Number of Trusts, and New Deposits by Type of Trust
Assets Number of trusts New deposits
Millions of dollars, year-end Year-end Millions of dollars, annual
Total Taxable Tax-free Total Taxable Tax-free Total Taxable Tax-free
Year trusts Equity debt debt trusts Equity debt debt trusts Equity debt debt
1990 $105,390 $4,192 $9,456 $91,742 12,131 171 722 11,238 $7,489 $495 $1,349 $5,644
1991 102,828 4,940 9,721 88,167 12,388 168 678 11,542 8,195 900 1,687 5,609
1992 97,925 6,484 9,976 81,465 13,598 230 745 12,623 8,909 1,771 2,385 4,752
1993 87,574 8,494 8,567 70,513 13,740 258 679 12,803 9,359 3,206 1,598 4,555
1994 73,682 9,285 7,252 57,144 13,310 306 568 12,436 8,915 3,265 1,709 3,941
1995 73,125 14,019 8,094 51,013 12,979 301 578 12,100 11,264 6,743 1,154 3,367
1996 72,204 22,922 8,485 40,796 11,764 378 591 10,795 21,662 18,316 800 2,546
1997 84,761 40,747 6,480 37,533 11,593 563 513 10,517 38,546 35,855 771 1,919
1998 93,943 56,413 5,380 32,151 10,966 872 414 9,680 47,675 45,947 562 1,166
1999 91,970 62,128 4,283 25,559 10,414 1,081 409 8,924 52,046 50,629 343 1,074
2000 74,161 48,060 3,502 22,599 10,072 1,554 369 8,149 43,649 42,570 196 883
2001 49,249 26,467 3,784 18,999 9,295 1,500 324 7,471 19,049 16,927 572 1,550
2002 36,016 14,651 4,020 17,345 8,303 1,247 366 6,690 11,600 9,131 862 1,607
2003 35,826 19,024 3,311 13,491 7,233 1,206 320 5,707 12,731 10,071 931 1,729
2004 37,267 23,201 2,635 11,432 6,499 1,166 295 5,038 17,125 14,559 981 1,585

CLOSED-END FUNDS, EXCHANGE-TRADED FUNDS, AND UNIT INVESTMENT TRUSTS

2005 40,894 28,634 2,280 9,980 6,019 1,251 304 4,464 22,598 21,526 289 782
2006 49,662 38,809 2,142 8,711 5,907 1,566 319 4,022 29,057 28,185 294 578
2007 53,040 43,295 2,066 7,680 6,030 1,964 327 3,739 35,836 35,101 298 438
2008 28,543 20,080 2,007 6,456 5,984 2,175 343 3,466 23,590 22,335 557 698
2009 38,336 24,774 3,668 9,894 6,049 2,145 438 3,466 22,293 16,159 2,201 3,933
2010 50,567 34,112 3,780 12,675 5,971 2,212 491 3,268 30,936 25,003 928 5,006
Note: Components may not add to the total because of rounding.

143
Data Section 2
 TABLE 17
Liquid Assets and Liquidity Ratio of Long-Term Mutual Funds
Year-end
Liquid assets Liquidity ratio*
Millions of dollars Percent
Equity Hybrid Bond Equity Hybrid Bond
Year Total funds funds funds Total funds funds funds
1986 $30,611 $14,612 $2,514 $13,485 7.2% 9.5% 9.8% 5.5%
1987 37,930 16,319 2,730 18,881 8.4 9.3 9.3 7.6
1988 44,980 17,742 2,986 24,252 9.5 9.4 11.3 9.5
1989 44,603 25,602 5,747 13,253 8.1 10.4 16.1 4.9
1990 48,440 27,344 4,225 16,872 8.5 11.4 11.7 5.8
1991 60,385 30,657 3,318 26,410 7.1 7.6 6.4 6.7
1992 73,984 42,417 6,595 24,972 6.7 8.3 8.5 5.0
1993 99,436 57,539 16,774 25,123 6.6 7.8 11.6 4.1
1994 120,430 70,885 20,093 29,453 7.8 8.3 12.2 5.6
1995 141,755 97,743 19,494 24,518 6.9 7.8 9.3 4.1
Data Section 3

1996 151,988 107,667 18,067 26,254 5.8 6.2 7.2 4.1

1997 198,826 145,565 24,761 28,500 5.8 6.1 7.8 3.9
1998 191,393 143,516 25,569 22,307 4.6 4.8 7.0 2.7
1999 219,098 174,692 20,656 23,750 4.2 4.3 5.5 2.9
2000 277,164 227,961 23,774 25,429 5.4 5.8 6.9 3.1
2001 222,475 172,044 25,938 24,492 4.7 5.0 7.5 2.6
2002 208,939 122,903 23,540 62,495 5.1 4.6 7.3 5.5
2003 259,580 157,218 29,218 73,144 4.8 4.3 6.8 5.9
2004 306,756 186,380 34,965 85,411 5.0 4.2 6.8 6.6
2005 302,922 194,394 40,030 68,499 4.4 3.9 7.1 5.0
2006 346,491 229,409 52,773 64,309 4.3 3.9 8.1 4.3
2007 381,306 276,962 54,092 50,251 4.3 4.2 7.5 3.0
2008 296,206 193,406 45,155 57,645 5.1 5.2 9.1 3.7
2009 365,866 178,229 46,386 141,251 4.7 3.6 7.3 6.4
2010 331,696 198,089 59,468 74,139 3.7 3.5 8.0 2.8
* Liquidity ratio is the ratio of liquid assets divided by total net assets at year-end.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

144 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 18
Liquidity Ratio* of Long-Term Mutual Funds by Investment Classification
Percent, year-end
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 8.7% 9.4% 10.2% 9.8% 6.3% 5.0% 21.1% 6.7% 10.8% 2.5% 3.0%

U.S. LONG-TERM MUTUAL FUNDS

1987 10.2 11.5 7.9 9.3 7.9 7.3 22.2 8.2 11.2 4.3 6.5
1988 10.5 7.1 8.8 11.3 13.1 7.0 17.3 11.5 17.8 4.4 7.2
1989 11.0 7.2 10.7 16.1 8.6 6.9 14.8 4.3 13.5 2.4 3.5
1990 12.0 11.7 10.6 11.7 8.6 11.4 43.7 1.3 8.0 2.7 4.7
1991 8.6 8.7 6.3 6.4 7.9 5.4 30.5 5.5 7.0 2.8 3.8
1992 10.3 9.6 5.9 8.5 8.4 5.7 22.8 2.3 6.5 2.8 3.8
1993 8.5 10.6 6.0 11.6 8.8 4.6 17.9 0.9 7.5 2.1 3.5
1994 9.1 10.8 6.2 12.2 10.2 7.9 20.0 2.8 8.6 2.8 4.5
1995 8.5 8.6 6.7 9.3 6.3 7.0 12.3 1.5 7.3 2.1 3.5
1996 6.6 7.0 5.4 7.2 5.3 6.7 9.0 -0.6 11.2 2.4 3.6
1997 6.4 8.0 5.1 7.8 4.8 5.3 8.7 0.8 9.8 2.1 2.8
1998 5.0 5.8 4.3 7.0 3.2 4.6 6.1 -3.0 8.7 1.7 2.4
1999 4.5 5.3 3.6 5.5 5.5 4.3 6.9 -4.6 8.2 2.1 2.5
2000 6.0 7.8 4.5 6.9 4.7 8.4 4.3 -2.6 3.1 3.1 3.5
2001 5.3 6.3 4.2 7.5 5.7 6.9 3.3 -0.3 0.4 2.3 3.1
2002 4.9 5.8 3.8 7.3 4.1 6.8 3.6 0.5 13.1 2.6 4.1
2003 4.1 5.7 3.9 6.8 6.2 5.3 6.1 1.1 12.3 2.2 3.7
2004 4.2 5.4 3.8 6.8 4.7 5.9 9.8 2.5 12.0 2.9 6.5
2005 3.8 5.1 3.5 7.1 3.8 5.1 6.1 0.3 8.8 2.6 5.7
2006 3.7 4.3 3.9 8.1 0.4 5.5 13.3 -4.9 9.5 2.1 4.4
2007 4.1 5.1 3.7 7.5 0.1 4.9 14.5 -4.9 4.6 1.8 4.6
2008 5.2 6.3 4.5 9.1 3.0 11.1 7.7 -0.5 3.6 1.7 4.9
2009 3.9 4.0 2.8 7.3 6.7 5.5 8.6 3.8 7.8 2.8 6.0
2010 3.7 4.3 2.5 8.0 3.4 5.8 10.3 -1.8 1.3 2.1 5.2
* Liquidity ratio is the ratio of liquid assets divided by total net assets at year-end.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

145
Data Section 3
 TABLE 19
Net New Cash Flow* of Long-Term Mutual Funds
Millions of dollars, annual
Year Total Equity funds Hybrid funds Bond funds
1986 $129,991 $20,386 $6,988 $102,618
1987 29,776 19,231 3,748 6,797
1988 -23,119 -14,948 -3,684 -4,488
1989 8,731 6,774 3,183 -1,226
1990 21,211 12,915 1,483 6,813
1991 106,213 39,888 7,089 59,236
1992 171,696 78,983 21,832 70,881
1993 242,049 127,260 44,229 70,559
1994 75,160 114,525 23,105 -62,470
1995 122,208 124,392 3,899 -6,082
1996 231,874 216,937 12,177 2,760
1997 272,030 227,106 16,499 28,424
1998 241,796 156,875 10,311 74,610
Data Section 3

1999 169,780 187,565 -13,705 -4,081

2000 228,874 309,367 -30,728 -49,765
2001 129,188 32,138 9,346 87,704
2002 120,583 -27,177 7,148 140,612
2003 215,843 152,451 31,762 31,629
2004 209,851 178,171 42,438 -10,757
2005 192,086 135,773 25,081 31,232
2006 227,104 158,942 7,481 60,682
2007 223,898 90,675 24,163 109,060
2008 -225,027 -234,324 -18,393 27,690
2009 389,990 -8,755 22,718 376,028
2010 227,825 -36,787 23,315 241,297
* Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

146 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 20
Net New Cash Flow and Components of Net New Cash Flow of Equity Mutual Funds
Millions of dollars, annual
Sales Redemptions
Net new cash New + Regular +
Year flow 1 exchange New 2 Exchange 3 exchange Regular4 Exchange 5
1986 $20,386 $87,997 $50,774 $37,224 $67,612 $26,051 $41,561
1987 19,231 139,596 65,093 74,502 120,365 38,601 81,764
1988 -14,948 68,827 25,641 43,186 83,774 33,247 50,528
1989 6,774 89,345 46,817 42,527 82,571 37,229 45,342
1990 12,915 104,334 62,872 41,462 91,419 44,487 46,931
1991 39,888 146,618 90,192 56,427 106,730 53,394 53,336
1992 78,983 201,720 134,309 67,411 122,738 61,465 61,272
1993 127,260 307,356 213,639 93,717 180,095 91,944 88,151
1994 114,525 366,659 252,887 113,772 252,134 141,097 111,037
1995 124,392 433,853 282,937 150,915 309,461 170,402 139,059
1996 216,937 674,323 442,372 231,951 457,385 240,531 216,854

Data Section 3
1997 227,106 880,286 579,064 301,222 653,180 362,022 291,158
1998 156,875 1,065,197 699,554 365,643 908,322 534,256 374,065
1999 187,565 1,410,845 918,600 492,245 1,223,280 744,144 479,136
2000 309,367 1,975,882 1,321,838 654,044 1,666,515 1,038,572 627,943
2001 32,138 1,330,963 953,475 377,488 1,298,826 892,985 405,841
2002 -27,177 1,220,950 899,182 321,768 1,248,127 879,216 368,911
2003 152,451 1,086,828 848,078 238,749 934,376 710,876 223,500
2004 178,171 1,107,248 935,762 171,486 929,077 762,520 166,557
2005 135,773 1,210,416 1,032,245 178,171 1,074,643 882,789 191,854
2006 158,942 1,437,413 1,231,740 205,672 1,278,471 1,054,828 223,643
2007 90,675 1,758,340 1,531,577 226,763 1,667,665 1,398,416 269,249
2008 -234,324 1,539,568 1,341,369 198,199 1,773,892 1,491,355 282,538
2009 -8,755 1,205,186 1,047,273 157,913 1,213,942 1,028,038 185,904
2010 -36,787 1,412,070 1,239,233 172,837 1,448,857 1,253,551 195,306
1 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
2 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through
reinvestment of dividends in existing accounts.
3 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
4 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
5 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

U.S. LONG-TERM MUTUAL FUNDS 147

 TABLE 21
Net New Cash Flow and Components of Net New Cash Flow of Hybrid Mutual Funds
Millions of dollars, annual
Sales Redemptions
Net new cash New + Regular +
Year flow 1 exchange New 2 Exchange 3 exchange Regular4 Exchange 5
1986 $6,988 $13,535 $12,342 $1,194 $6,548 $5,162 $1,386
1987 3,748 14,948 12,419 2,528 11,200 7,848 3,353
1988 -3,684 6,259 4,601 1,658 9,943 7,521 2,422
1989 3,183 11,139 9,334 1,805 7,956 5,780 2,176
1990 1,483 9,721 8,021 1,700 8,238 5,619 2,619
1991 7,089 16,912 13,789 3,122 9,823 7,030 2,792
1992 21,832 32,955 26,586 6,369 11,122 7,265 3,858
1993 44,229 62,391 50,866 11,525 18,162 11,828 6,334
1994 23,105 60,434 50,436 9,998 37,329 25,761 11,568
1995 3,899 43,851 36,038 7,813 39,952 28,241 11,711
1996 12,177 58,089 48,494 9,595 45,912 31,915 13,997
Data Section 3

1997 16,499 70,279 56,856 13,423 53,780 38,926 14,854

1998 10,311 84,483 68,853 15,630 74,171 54,649 19,523
1999 -13,705 82,993 68,582 14,411 96,698 71,076 25,622
2000 -30,728 71,823 58,350 13,473 102,551 74,510 28,041
2001 9,346 87,492 70,012 17,480 78,146 60,931 17,215
2002 7,148 93,443 76,324 17,119 86,296 68,585 17,711
2003 31,762 108,887 90,876 18,010 77,124 63,731 13,393
2004 42,438 131,849 115,513 16,336 89,410 76,879 12,531
2005 25,081 122,057 106,983 15,074 96,976 82,326 14,650
2006 7,481 123,183 106,978 16,205 115,702 96,772 18,930
2007 24,163 182,717 162,435 20,282 158,554 137,656 20,898
2008 -18,393 164,389 141,267 23,121 182,781 149,314 33,468
2009 22,718 159,927 131,356 28,571 137,209 115,323 21,886
2010 23,315 172,220 150,761 21,459 148,905 128,188 20,717
1 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
2 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through
reinvestment of dividends in existing accounts.
3 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
4 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
5 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

148 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 22
Net New Cash Flow and Components of Net New Cash Flow of Bond Mutual Funds
Millions of dollars, annual
Sales Redemptions
Net new cash New + Regular +
Year flow 1 exchange New 2 Exchange 3 exchange Regular4 Exchange 5
1986 $102,618 $158,874 $138,240 $20,634 $56,256 $35,776 $20,480
1987 6,797 123,528 93,725 29,803 116,731 69,627 47,104
1988 -4,488 72,174 47,378 24,796 76,662 51,558 25,103
1989 -1,226 71,770 48,602 23,168 72,996 48,517 24,480
1990 6,813 80,608 57,074 23,534 73,795 47,959 25,836
1991 59,236 141,622 108,059 33,563 82,387 56,158 26,228
1992 70,881 217,680 171,868 45,812 146,799 96,573 50,226
1993 70,559 260,519 207,265 53,254 189,960 127,200 62,759
1994 -62,470 185,015 129,958 55,057 247,485 162,360 85,125
1995 -6,082 165,610 109,797 55,814 171,693 114,252 57,441
1996 2,760 202,037 136,827 65,210 199,277 124,984 74,293

Data Section 3
1997 28,424 240,377 174,682 65,695 211,953 140,245 71,708
1998 74,610 312,637 229,375 83,263 238,028 158,775 79,253
1999 -4,081 298,122 216,467 81,655 302,202 205,968 96,234
2000 -49,765 245,866 184,021 61,845 295,631 217,157 78,474
2001 87,704 389,128 297,243 91,885 301,424 222,933 78,491
2002 140,612 508,466 396,225 112,241 367,854 280,355 87,499
2003 31,629 515,201 424,037 91,164 483,572 373,295 110,276
2004 -10,757 396,214 341,542 54,672 406,971 338,386 68,586
2005 31,232 407,115 355,676 51,438 375,882 320,739 55,143
2006 60,682 448,892 394,315 54,577 388,211 331,234 56,976
2007 109,060 587,890 503,557 84,333 478,831 408,328 70,502
2008 27,690 710,442 582,981 127,461 682,752 586,584 96,168
2009 376,028 1,011,491 862,410 149,081 635,463 525,647 109,816
2010 241,297 1,101,017 976,494 124,523 859,721 745,531 114,190
1 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
2 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through
reinvestment of dividends in existing accounts.
3 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
4 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
5 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

U.S. LONG-TERM MUTUAL FUNDS 149

 Data Section 3

150
TABLE 23
Net New Cash Flow* of Long-Term Mutual Funds by Investment Classification
Millions of dollars, annual
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 $3,071 $4,200 $13,115 $6,988 $3,468 $9,618 $429 $57,450 $3,416 $12,105 $16,132
1987 7,432 -568 12,368 3,748 608 610 673 2,892 1,114 1,864 -964
1988 -7,210 -2,402 -5,336 -3,684 -200 3,209 609 -13,655 464 2,878 2,209
1989 -64 1,210 5,628 3,183 774 -2,875 -84 -12,812 1,738 6,484 5,550
1990 4,610 6,812 1,493 1,483 1,269 -5,229 7,615 -7,574 791 6,192 3,749
1991 23,509 3,959 12,421 7,089 6,016 1,682 10,282 17,337 2,685 11,112 10,121
1992 43,171 7,044 28,768 21,832 6,881 4,604 -3,003 29,643 4,389 13,205 15,162
1993 48,247 38,441 40,573 44,229 11,958 8,467 750 6,186 4,867 18,998 19,333
1994 42,854 44,248 27,424 23,105 715 -972 -6,800 -39,862 -102 -6,242 -9,208
1995 72,452 11,512 40,428 3,899 6,366 8,258 -4,248 -13,670 4,101 -2,221 -4,670
1996 99,511 47,516 69,910 12,177 6,368 12,486 -2,202 -13,771 5,772 -1,953 -3,940
1997 94,495 37,846 94,766 16,499 11,077 16,851 -1,287 -9,494 10,405 353 520
1998 82,591 7,527 66,757 10,311 20,121 13,602 -1,166 8,899 17,955 7,999 7,200
1999 160,190 11,224 16,151 -13,705 6,195 -2,546 -2,179 -2,201 8,802 -4,583 -7,568
2000 307,602 52,901 -51,136 -30,728 -7,736 -12,306 -2,208 -16,346 2,968 -5,513 -8,625
2001 17,591 -22,176 36,723 9,346 11,149 7,195 -1,022 27,872 30,919 6,631 4,961
2002 -35,360 -4,242 12,424 7,148 8,808 10,580 167 58,370 46,284 5,720 10,684
2003 67,380 22,047 63,024 31,762 7,902 26,335 3,040 -18,729 20,160 -8,056 977
2004 47,244 66,002 64,925 42,438 11,534 -9,327 5,810 -19,376 14,263 -8,239 -5,422
2005 14,525 104,188 17,060 25,081 6,229 -15,607 7,739 -9,720 37,551 881 4,159
2006 7,911 147,903 3,128 7,481 14,060 -2,818 9,730 -20,603 45,194 3,647 11,472
2007 -31,725 138,318 -15,918 24,163 11,388 -2,679 18,498 -2,736 73,715 3,337 7,536
2008 -104,188 -82,732 -47,404 -18,393 -22,119 -700 5,325 23,052 14,313 -2,239 10,058
2009 -11,064 30,721 -28,412 22,718 70,402 22,381 22,400 35,111 156,649 6,082 63,003
2010 -53,467 59,105 -42,425 23,315 52,181 7,556 51,304 15,200 103,870 -2,812 13,999
* Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 24
New Sales* of Long-Term Mutual Funds by Investment Classification
Millions of dollars, annual
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 $21,395 $7,076 $22,303 $12,342 $4,066 $12,645 $432 $78,991 $4,873 $14,505 $22,728

U.S. LONG-TERM MUTUAL FUNDS

1987 30,529 6,829 27,736 12,419 3,224 8,285 1,073 51,019 4,574 9,909 15,642
1988 12,417 2,206 11,018 4,601 1,738 7,856 1,348 15,940 2,923 7,104 10,469
1989 19,943 4,245 22,629 9,334 2,514 7,607 740 10,966 3,679 10,046 13,049
1990 27,234 11,273 24,364 8,021 5,545 3,372 8,639 13,206 2,093 11,430 12,789
1991 44,081 9,860 36,251 13,789 13,242 4,546 14,556 37,187 4,028 16,571 17,931
1992 68,960 13,225 52,124 26,586 24,014 9,362 12,664 70,148 7,167 21,554 26,957
1993 99,309 40,651 73,679 50,866 37,045 14,375 14,193 65,850 9,058 29,828 36,917
1994 112,063 68,396 72,428 50,436 37,167 11,852 8,324 27,386 6,581 16,677 21,971
1995 142,591 53,555 86,792 36,038 28,686 15,415 4,889 21,993 9,477 13,355 15,983
1996 221,530 88,669 132,173 48,494 36,433 22,989 6,441 20,757 15,936 15,588 18,684
1997 275,013 120,065 183,986 56,856 42,472 33,312 7,773 24,106 24,104 19,029 23,886
1998 344,980 132,747 221,827 68,853 53,039 41,872 7,533 38,607 33,863 25,406 29,056
1999 500,938 181,670 235,992 68,582 51,509 32,360 5,620 38,138 38,372 22,931 27,536
2000 765,497 334,218 222,123 58,350 43,763 23,171 5,911 26,450 43,706 17,152 23,868
2001 480,724 248,277 224,474 70,012 60,866 33,747 6,127 63,180 77,281 25,701 30,341
2002 437,932 241,734 219,516 76,324 66,736 40,269 7,566 102,936 111,889 27,578 39,250
2003 422,909 199,696 225,474 90,876 79,333 66,433 13,410 82,784 120,205 21,967 39,906
2004 497,004 174,788 263,969 115,513 76,513 39,662 14,881 52,187 107,795 17,631 32,873
2005 534,956 231,022 266,267 106,983 72,424 33,956 20,261 46,053 122,748 22,259 37,975
2006 609,750 343,709 278,282 106,978 85,305 32,691 25,919 41,003 136,912 25,615 46,871
2007 737,628 464,297 329,652 162,435 98,122 42,457 38,682 48,153 192,249 29,469 54,426
2008 681,472 352,863 307,035 141,267 91,546 42,921 46,595 87,386 214,099 30,483 69,951
2009 533,799 281,797 231,677 131,356 161,217 66,221 54,139 124,945 315,653 28,333 111,902
2010 608,138 372,454 258,641 150,761 190,496 75,807 97,500 121,883 353,573 28,460 108,775
* New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

151
Data Section 3
 Data Section 3

152
TABLE 25
Exchange Sales* of Long-Term Mutual Funds by Investment Classification
Millions of dollars, annual
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 $20,019 $3,619 $13,585 $1,194 $1,192 $2,792 $37 $4,096 $1,197 $2,242 $9,079
1987 47,382 4,434 22,686 2,528 1,595 3,398 438 6,001 1,898 3,903 12,569
1988 31,041 1,451 10,693 1,658 1,650 4,364 605 4,979 1,451 3,077 8,670
1989 30,650 1,676 10,201 1,805 1,748 3,396 367 4,575 1,463 3,360 8,259
1990 29,022 3,804 8,635 1,700 2,108 2,279 816 5,370 535 3,429 8,998
1991 39,712 4,357 12,357 3,122 3,874 3,392 1,280 10,356 935 3,814 9,913
1992 45,976 6,327 15,108 6,369 6,008 6,228 2,475 11,784 1,184 5,021 13,113
1993 57,080 18,074 18,563 11,525 6,690 6,694 4,179 9,795 1,435 6,121 18,340
1994 62,488 33,316 17,968 9,998 5,465 7,875 3,355 7,807 2,066 9,424 19,063
1995 95,586 30,313 25,017 7,813 6,776 6,995 2,016 7,279 1,868 10,808 20,071
1996 138,835 52,450 40,666 9,595 6,920 9,773 2,996 7,666 2,507 10,599 24,748
1997 172,140 65,594 63,488 13,423 7,977 12,588 3,323 9,757 3,770 8,309 19,971
1998 217,434 77,380 70,828 15,630 13,106 13,920 2,924 20,792 8,178 7,485 16,858
1999 304,719 111,442 76,084 14,411 13,505 13,000 1,367 23,142 6,602 6,984 17,056
2000 427,248 161,953 64,844 13,473 9,193 10,268 1,333 16,715 8,161 5,309 10,865
2001 233,731 84,066 59,692 17,480 17,686 11,093 1,162 26,694 16,216 5,367 13,666
2002 199,824 69,250 52,693 17,119 16,486 11,262 1,799 39,068 24,398 5,654 13,573
2003 141,962 40,278 56,509 18,010 15,622 16,948 2,804 21,452 19,831 4,312 10,194
2004 101,315 27,014 43,157 16,336 11,227 7,694 1,541 12,433 12,893 2,788 6,096
2005 98,347 37,703 42,121 15,074 8,796 6,463 2,186 11,442 13,153 3,012 6,386
2006 106,295 55,923 43,455 16,205 9,028 6,310 2,229 11,727 15,006 3,456 6,821
2007 102,352 67,798 56,613 20,282 14,921 6,940 3,658 13,942 28,499 5,704 10,669
2008 93,424 46,724 58,051 23,121 19,925 7,251 7,138 34,481 33,867 7,069 17,730
2009 72,179 44,455 41,279 28,571 24,974 12,920 6,697 24,248 55,088 5,180 19,975
2010 75,544 56,018 41,275 21,459 25,286 13,283 7,204 20,863 38,772 3,856 15,259
* Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 26
Redemptions* of Long-Term Mutual Funds by Investment Classification
Millions of dollars, annual
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 $14,004 $2,958 $9,089 $5,162 $872 $3,128 $28 $21,045 $1,645 $2,677 $6,381

U.S. LONG-TERM MUTUAL FUNDS

1987 19,892 5,044 13,665 7,848 2,233 5,900 489 40,407 3,176 5,733 11,689
1988 16,268 3,663 13,316 7,521 1,891 5,527 731 28,056 2,687 4,290 8,377
1989 17,859 2,895 16,476 5,780 2,000 8,133 768 22,889 2,398 4,248 8,080
1990 19,810 4,198 20,480 5,619 4,366 6,798 1,326 20,314 1,288 5,143 8,724
1991 23,982 5,645 23,766 7,030 8,387 3,856 4,476 22,883 1,446 6,030 9,081
1992 29,209 6,730 25,526 7,265 17,633 5,652 12,462 37,589 2,343 8,310 12,583
1993 47,885 10,183 33,876 11,828 24,966 7,255 11,190 52,251 3,487 10,647 17,404
1994 68,498 28,854 43,745 25,761 32,827 10,506 13,016 56,835 5,512 18,399 25,265
1995 81,950 37,830 50,622 28,241 23,342 9,390 7,912 33,731 5,198 15,209 19,470
1996 126,349 44,950 69,233 31,915 29,487 12,096 8,194 29,956 9,326 16,145 19,782
1997 183,157 79,102 99,763 38,926 30,745 18,013 8,220 30,288 13,747 16,965 22,267
1998 261,491 119,842 152,924 54,649 35,368 27,247 8,010 31,552 17,445 17,204 21,949
1999 367,674 171,238 205,233 71,076 44,569 32,125 7,091 36,639 28,068 25,176 32,299
2000 519,969 283,697 234,907 74,510 49,098 30,805 7,536 37,693 38,719 22,077 31,229
2001 444,992 260,512 187,481 60,931 53,531 26,799 6,762 39,908 50,531 18,921 26,482
2002 445,585 239,854 193,777 68,585 60,998 29,877 7,798 58,159 71,416 21,733 30,374
2003 361,178 180,364 169,334 63,731 71,926 43,779 10,732 86,906 95,929 26,861 37,163
2004 443,265 118,178 201,077 76,879 65,891 45,667 9,199 66,640 91,098 23,938 35,953
2005 502,052 142,237 238,500 82,326 66,142 46,136 13,275 53,933 86,713 21,099 33,442
2006 577,615 215,013 262,201 96,772 70,899 35,174 16,566 57,300 93,515 21,957 35,823
2007 736,027 336,035 326,353 137,656 87,940 43,340 21,538 53,427 129,465 25,738 46,881
2008 755,817 407,405 328,133 149,314 115,045 42,410 42,768 82,032 209,180 32,084 63,066
2009 533,008 248,533 246,497 115,323 100,918 47,459 34,718 89,578 173,905 22,716 56,353
2010 650,800 308,208 294,543 128,188 141,605 71,910 48,167 105,559 255,862 29,007 93,421
* Redemptions are the dollar value of shareholder liquidation of mutual fund shares.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

153
Data Section 3
 Data Section 3

154
TABLE 27
Exchange Redemptions* of Long-Term Mutual Funds by Investment Classification
Millions of dollars, annual
EQUITY FUNDS BOND FUNDS
Capital HYBRID Strategic
Year appreciation World Total return FUNDS Corporate High yield World Government income State muni National muni
1986 $24,340 $3,537 $13,684 $1,386 $918 $2,691 $13 $4,592 $1,009 $1,964 $9,294
1987 50,587 6,787 24,389 3,353 1,979 5,173 349 13,721 2,182 6,215 17,486
1988 34,400 2,396 13,731 2,422 1,697 3,484 614 6,519 1,223 3,013 8,553
1989 32,799 1,817 10,726 2,176 1,488 5,745 424 5,465 1,006 2,673 7,679
1990 31,837 4,068 11,027 2,619 2,018 4,082 515 5,836 549 3,524 9,313
1991 36,301 4,613 12,422 2,792 2,712 2,399 1,078 7,323 831 3,243 8,642
1992 42,556 5,778 12,938 3,858 5,508 5,334 5,680 14,700 1,619 5,060 12,326
1993 60,257 10,101 17,793 6,334 6,810 5,347 6,432 17,208 2,138 6,305 18,520
1994 63,200 28,610 19,227 11,568 9,091 10,193 5,463 18,220 3,238 13,944 24,977
1995 83,775 34,525 20,759 11,711 5,754 4,762 3,241 9,211 2,045 11,174 21,254
1996 134,505 48,653 33,696 13,997 7,498 8,180 3,446 12,238 3,345 11,995 27,590
1997 169,502 68,712 52,944 14,854 8,627 11,036 4,163 13,070 3,722 10,021 21,069
1998 218,332 82,759 72,974 19,523 10,656 14,943 3,613 18,947 6,641 7,688 16,764
1999 277,794 110,650 90,692 25,622 14,250 15,780 2,074 26,842 8,104 9,322 19,861
2000 365,173 159,573 103,197 28,041 11,595 14,939 1,916 21,818 10,181 5,897 12,128
2001 251,871 94,008 59,962 17,215 13,872 10,846 1,550 22,095 12,048 5,517 12,564
2002 227,531 75,373 66,008 17,711 13,416 11,075 1,400 25,476 18,587 5,780 11,766
2003 136,313 37,563 49,624 13,393 15,127 13,267 2,443 36,058 23,947 7,475 11,960
2004 107,810 17,622 41,124 12,531 10,316 11,016 1,413 17,356 15,327 4,720 8,438
2005 116,726 22,300 52,828 14,650 8,849 9,889 1,432 13,283 11,638 3,291 6,761
2006 130,518 36,716 56,408 18,930 9,374 6,644 1,851 16,033 13,210 3,467 6,398
2007 135,677 57,742 75,830 20,898 13,715 8,735 2,304 11,403 17,568 6,098 10,678
2008 123,267 74,913 84,358 33,468 18,546 8,462 5,640 16,784 24,474 7,707 14,557
2009 84,035 46,997 54,872 21,886 14,871 9,300 3,718 24,504 40,188 4,714 12,520
2010 86,349 61,159 47,799 20,717 21,996 9,625 5,233 21,986 32,613 6,121 16,615
* Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 28
Annual Redemption Rates of Long-Term Mutual Funds
Percent
Narrow redemption rate 1 Broad redemption rate 2
Equity Hybrid Bond Equity Hybrid Bond
Year Total funds funds funds Total funds funds funds
1986 19.8% 19.6% 23.8% 19.6% 38.6% 50.9% 30.2% 30.7%
1987 26.5 23.4 28.5 28.3 56.7 73.0 40.7 47.5
1988 20.0 18.2 27.1 20.5 36.9 45.9 35.8 30.4
1989 17.9 17.1 18.7 18.4 31.9 38.0 25.7 27.7
1990 17.5 18.4 15.7 17.0 31.0 37.7 23.0 26.2
1991 16.4 16.6 15.9 16.4 28.1 33.1 22.2 24.1
1992 17.0 13.4 11.2 21.5 28.8 26.7 17.1 32.7
1993 17.8 14.7 10.6 22.6 29.9 28.7 16.3 33.8
1994 21.6 17.7 16.7 28.3 35.2 31.6 24.2 43.2
1995 17.4 16.2 15.1 20.3 28.9 29.4 21.3 30.5
1996 17.0 16.2 13.8 20.1 30.0 30.7 19.8 32.0

Data Section 3
1997 17.9 17.7 13.7 20.5 30.5 31.9 18.9 31.0
1998 19.7 20.0 16.0 20.4 32.2 34.0 21.7 30.6
1999 21.7 21.2 19.1 25.1 34.5 34.9 26.0 36.8
2000 25.7 26.0 20.6 26.7 39.9 41.6 28.3 36.4
2001 24.0 24.2 17.6 25.7 34.2 35.2 22.6 34.7
2002 27.9 28.9 20.5 27.3 38.7 41.0 25.8 35.8
2003 24.2 22.4 16.9 31.4 31.5 29.4 20.5 40.7
2004 20.4 18.9 16.3 26.7 24.7 23.0 18.9 32.1
2005 19.7 18.9 15.2 24.2 23.7 23.0 17.9 28.4
2006 19.9 19.4 15.9 23.2 23.9 23.6 19.1 27.2
2007 22.9 22.5 20.1 25.7 27.2 26.8 23.2 30.2
2008 30.3 29.2 24.6 36.1 35.9 34.7 30.1 42.0
2009 24.6 23.7 20.3 27.8 29.3 28.0 24.1 33.7
2010 25.3 23.6 18.6 31.0 29.2 27.3 21.6 35.7
1 Narrow redemption rate is calculated by taking the sum of regular redemptions for the year as a percentage of average net assets
at the beginning and end of the period.
2 Broad redemption rate is calculated by taking the sum of regular redemptions and exchange redemptions for the year as a

percentage of average net assets at the beginning and end of the period.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

U.S. LONG-TERM MUTUAL FUNDS 155

 TABLE 29
Portfolio Holdings of Long-Term Mutual Funds and Share of Total Net Assets
Millions of dollars, year-end
Common and Long-term U.S.
Total net preferred government Corporate Municipal Liquid
Year assets stocks bonds bonds bonds assets Other
1990 $566,849 $216,451 $128,153 $45,365 $117,084 $48,440 $11,356
1991 850,744 381,289 163,093 87,571 149,439 60,385 8,967
1992 1,096,342 485,188 225,358 115,389 191,779 73,984 4,645
1993 1,504,644 712,137 272,293 165,387 249,203 99,436 6,187
1994 1,544,320 823,714 223,070 155,157 211,127 120,430 10,822
1995 2,058,275 1,215,210 259,076 190,880 245,330 141,755 6,024
1996 2,623,994 1,718,220 264,925 238,030 245,182 151,988 5,649
1997 3,409,315 2,358,205 282,183 292,901 266,324 198,826 10,876
1998 4,173,531 3,004,181 286,577 389,225 292,395 191,393 9,760
1999 5,233,194 4,059,536 293,542 388,385 267,428 219,098 5,204
2000 5,119,386 3,910,275 309,697 349,072 269,179 277,164 3,999
Data Section 3

2001 4,689,603 3,424,372 379,392 371,946 289,655 222,475 1,763

2002 4,118,402 2,687,884 481,377 417,779 320,509 208,939 1,913
2003 5,362,398 3,761,057 506,227 500,390 332,114 259,580 3,031
2004 6,193,746 4,490,102 537,583 532,486 318,333 306,756 8,486
2005 6,864,287 5,055,348 612,962 549,619 330,879 302,922 12,557
2006 8,059,484 6,024,631 645,685 667,555 359,156 346,491 15,966
2007 8,916,522 6,612,378 749,917 782,802 369,040 381,306 21,080
2008 5,771,368 3,736,193 704,716 675,919 336,820 296,206 21,514
2009 7,804,303 5,098,508 850,434 1,022,205 449,807 365,866 17,483
2010 9,016,755 5,862,371 1,079,681 1,257,895 478,757 331,696 6,355

Percent, year-end
1990 100.0% 38.2% 22.6% 8.0% 20.7% 8.5% 2.0%
1991 100.0 44.8 19.2 10.3 17.6 7.1 1.1
1992 100.0 44.3 20.6 10.5 17.5 6.7 0.4
1993 100.0 47.3 18.1 11.0 16.6 6.6 0.4
1994 100.0 53.3 14.4 10.0 13.7 7.8 0.7
1995 100.0 59.0 12.6 9.3 11.9 6.9 0.3
1996 100.0 65.5 10.1 9.1 9.3 5.8 0.2
1997 100.0 69.2 8.3 8.6 7.8 5.8 0.3
1998 100.0 72.0 6.9 9.3 7.0 4.6 0.2
1999 100.0 77.6 5.6 7.4 5.1 4.2 0.1
2000 100.0 76.4 6.0 6.8 5.3 5.4 0.1
2001 100.0 73.0 8.1 7.9 6.2 4.7 0.0
2002 100.0 65.3 11.7 10.1 7.8 5.1 0.0
2003 100.0 70.1 9.4 9.3 6.2 4.8 0.1
2004 100.0 72.5 8.7 8.6 5.1 5.0 0.1
2005 100.0 73.6 8.9 8.0 4.8 4.4 0.2
2006 100.0 74.8 8.0 8.3 4.5 4.3 0.2
2007 100.0 74.2 8.4 8.8 4.1 4.3 0.2
2008 100.0 64.7 12.2 11.7 5.8 5.1 0.4
2009 100.0 65.3 10.9 13.1 5.8 4.7 0.2
2010 100.0 65.0 12.0 14.0 5.3 3.7 0.1
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

156 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 30
Portfolio Holdings of Long-Term Mutual Funds as a Share of Total Net Assets by
Type of Fund
Year-end
Total net
Common and Long-term U.S. assets
Total net preferred government Corporate Municipal Liquid Millions of
Year assets stocks bonds bonds bonds assets Other dollars
Equity funds
1997 100.0% 91.8% 0.9% 0.9% 0.0% 6.1% 0.2% $2,368,024
1998 100.0 93.6 0.5 1.0 0.0 4.8 0.1 2,977,944
1999 100.0 94.7 0.2 0.7 0.0 4.3 0.0 4,041,890
2000 100.0 93.4 0.2 0.6 0.0 5.8 0.0 3,961,922
2001 100.0 94.0 0.2 0.7 0.0 5.0 0.0 3,419,606
2002 100.0 93.8 0.5 1.0 0.0 4.6 0.0 2,664,007
2003 100.0 94.7 0.2 0.7 0.0 4.3 0.0 3,686,302
2004 100.0 94.8 0.2 0.7 0.0 4.2 0.1 4,386,666

Data Section 3
2005 100.0 95.1 0.2 0.7 0.0 3.9 0.1 4,942,655
2006 100.0 95.1 0.3 0.6 0.0 3.9 0.1 5,914,100
2007 100.0 94.7 0.3 0.6 0.0 4.2 0.2 6,518,757
2008 100.0 93.2 0.4 0.9 0.0 5.2 0.3 3,705,548
2009 100.0 95.0 0.4 1.0 0.0 3.6 0.1 4,957,044
2010 100.0 95.2 0.4 0.9 0.0 3.5 0.1 5,667,400
Hybrid funds
1997 100.0% 54.2% 16.1% 20.7% 0.3% 7.8% 0.9% $317,111
1998 100.0 55.6 12.8 23.8 0.4 7.0 0.5 364,997
1999 100.0 57.9 13.5 22.6 0.4 5.5 0.1 378,809
2000 100.0 57.7 13.9 21.1 0.3 6.9 0.1 346,276
2001 100.0 58.1 12.4 21.6 0.2 7.5 0.2 344,872
2002 100.0 56.9 12.3 23.1 0.3 7.3 0.1 323,947
2003 100.0 61.1 10.8 20.9 0.3 6.8 0.1 428,326
2004 100.0 62.1 11.5 19.0 0.4 6.8 0.1 516,603
2005 100.0 61.5 10.7 20.1 0.5 7.1 0.1 564,349
2006 100.0 60.0 10.6 20.7 0.4 8.1 0.1 650,314
2007 100.0 59.0 10.6 22.3 0.4 7.5 0.2 716,733
2008 100.0 54.6 10.0 25.0 0.5 9.1 0.8 498,284
2009 100.0 58.1 9.4 24.0 0.4 7.3 0.7 639,147
2010 100.0 60.0 8.1 22.7 0.5 8.0 0.7 741,068
Bond funds
1997 100.0% 1.7% 28.9% 28.4% 36.6% 3.9% 0.4% $724,179
1998 100.0 1.7 27.2 32.8 35.0 2.7 0.6 830,590
1999 100.0 1.7 28.6 33.6 32.7 2.9 0.4 812,494
2000 100.0 1.3 31.3 30.9 33.0 3.1 0.3 811,188
2001 100.0 0.9 35.8 29.4 31.2 2.6 0.0 925,124
2002 100.0 0.5 37.8 27.9 28.3 5.5 0.0 1,130,448
2003 100.0 0.6 36.1 30.8 26.5 5.9 0.1 1,247,770
2004 100.0 0.7 36.4 31.4 24.5 6.6 0.4 1,290,477
2005 100.0 0.7 39.8 29.7 24.2 5.0 0.5 1,357,283
2006 100.0 0.7 37.5 33.2 23.9 4.3 0.5 1,495,069
2007 100.0 0.9 39.0 34.7 21.8 3.0 0.6 1,681,032
2008 100.0 0.6 40.8 33.0 21.3 3.7 0.5 1,567,536
2009 100.0 0.8 35.0 37.2 20.2 6.4 0.4 2,208,112
2010 100.0 1.0 38.3 39.8 18.2 2.8 -0.1 2,608,287
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

U.S. LONG-TERM MUTUAL FUNDS 157

 TABLE 31
Paid and Reinvested Dividends of Long-Term Mutual Funds by Type of Fund
Millions of dollars, annual
Paid dividends Reinvested dividends
Equity Hybrid Bond Equity Hybrid Bond
Year Total funds funds funds Total funds funds funds
1986 $22,689 $6,328 $1,499 $14,862 $13,991 $3,706 $1,087 $9,197
1987 31,708 7,246 1,934 22,528 18,976 4,841 1,476 12,659
1988 31,966 6,554 1,873 23,539 17,494 4,476 1,217 11,801
1989 34,102 10,235 2,165 21,702 20,584 7,119 1,383 12,082
1990 33,156 8,787 2,350 22,018 21,124 6,721 1,725 12,678
1991 35,145 9,007 2,337 23,801 24,300 7,255 1,907 15,139
1992 58,608 17,023 4,483 37,102 30,393 8,845 2,937 18,611
1993 73,178 20,230 6,810 46,137 38,116 12,174 4,270 21,672
1994 61,261 17,279 6,896 37,086 39,136 12,971 5,043 21,122
1995 67,229 22,567 9,052 35,610 46,635 18,286 6,929 21,421
1996 73,282 25,061 9,844 38,378 53,213 21,345 8,196 23,672
Data Section 3

1997 79,522 27,597 11,607 40,318 58,423 23,100 9,602 25,721

1998 81,011 25,495 11,456 44,060 60,041 22,377 9,528 28,135
1999 95,443 32,543 12,821 50,078 69,973 27,332 10,746 31,894
2000 88,215 27,987 10,681 49,546 66,277 24,590 9,276 32,411
2001 82,967 22,325 10,161 50,481 62,306 20,090 8,960 33,256
2002 82,065 21,395 9,214 51,455 62,413 19,375 8,292 34,746
2003 85,926 25,386 9,236 51,303 66,870 23,012 8,225 35,634
2004 98,130 36,154 10,901 51,075 78,252 32,665 9,552 36,034
2005 115,500 44,431 13,190 57,879 94,023 40,223 11,577 42,223
2006 143,496 62,565 16,663 64,268 119,073 56,434 14,737 47,901
2007 181,020 81,510 20,861 78,649 151,788 73,156 18,330 60,302
2008 181,650 74,703 21,301 85,646 152,671 67,387 18,806 66,479
2009 168,126 62,438 18,166 87,522 140,465 56,367 15,649 68,449
2010 180,988 65,806 18,069 97,113 152,341 59,723 16,047 76,572
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

158 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 32
Paid and Reinvested Capital Gains of Long-Term Mutual Funds by Type of Fund
Millions of dollars, annual
Paid capital gains Reinvested capital gains
Equity Hybrid Bond Equity Hybrid Bond
Year Total funds funds funds Total funds funds funds
1986 $17,661 $13,942 $1,240 $2,478 $14,275 $11,851 $778 $1,646
1987 22,926 18,603 1,605 2,718 17,816 15,449 1,056 1,312
1988 6,354 4,785 620 948 4,769 3,883 364 522
1989 14,766 12,665 540 1,562 9,710 8,744 348 617
1990 8,017 6,833 443 742 5,515 4,975 255 285
1991 13,917 11,961 861 1,095 9,303 8,242 485 576
1992 22,089 17,294 1,488 3,306 14,906 12,233 1,134 1,538
1993 35,905 27,705 3,496 4,704 25,514 19,954 2,697 2,862
1994 29,744 26,351 2,411 981 24,864 22,038 2,093 733
1995 54,271 50,204 3,343 724 46,866 43,550 2,845 471
1996 100,489 88,212 10,826 1,451 87,416 76,638 9,769 1,009

Data Section 3
1997 182,764 160,744 19,080 2,941 164,916 145,358 17,360 2,198
1998 164,989 138,681 21,572 4,737 151,105 127,473 19,698 3,935
1999 237,624 219,484 16,841 1,299 206,508 190,300 15,229 979
2000 325,841 307,586 17,808 446 298,429 281,339 16,719 371
2001 68,626 60,717 5,488 2,421 64,820 57,564 5,198 2,059
2002 16,097 10,886 548 4,663 14,749 10,186 530 4,033
2003 14,397 7,728 813 5,856 12,956 7,142 748 5,065
2004 54,741 42,286 5,982 6,473 49,896 38,740 5,547 5,609
2005 129,042 113,878 11,274 3,890 117,556 103,816 10,410 3,330
2006 256,915 236,622 18,218 2,076 236,466 217,589 17,099 1,778
2007 413,630 380,193 29,984 3,453 380,975 349,876 28,096 3,003
2008 132,406 110,278 8,613 13,514 123,273 103,270 8,141 11,863
2009 15,680 6,104 413 9,163 14,370 5,781 402 8,188
2010 42,909 15,532 1,767 25,610 38,922 14,594 1,659 22,670
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

U.S. LONG-TERM MUTUAL FUNDS 159

 Data Section 3

160
TABLE 33
Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Long-Term Mutual Funds
Millions of dollars, annual
Total portfolio Common stock Other securities
Year Purchases Sales Net purchases Purchases Sales Net purchases Purchases Sales Net purchases
1986 $500,597 $365,087 $135,509 $134,446 $118,026 $16,421 $366,150 $247,062 $119,089
1987 530,601 485,271 45,330 198,859 176,004 22,855 331,741 309,267 22,474
1988 410,509 421,223 -10,713 112,742 128,815 -16,073 297,767 292,407 5,359
1989 471,744 445,453 26,291 142,771 141,694 1,077 328,973 303,759 25,214
1990 554,720 505,780 48,940 166,398 146,580 19,817 388,322 359,199 29,123
1991 735,674 608,111 127,563 250,289 209,276 41,013 485,386 398,835 86,551
1992 949,366 758,475 190,891 327,518 261,857 65,661 621,848 496,618 125,230
1993 1,335,506 1,060,360 275,145 506,713 380,855 125,858 828,793 679,505 149,288
1994 1,433,739 1,329,324 104,414 628,668 512,346 116,321 805,071 816,978 -11,907
1995 1,550,510 1,400,702 149,809 790,017 686,756 103,260 760,494 713,946 46,548
1996 2,018,253 1,736,884 281,370 1,151,262 927,266 223,996 866,991 809,618 57,373
1997 2,384,639 2,108,981 275,659 1,457,384 1,268,983 188,401 927,255 839,997 87,258
1998 2,861,562 2,560,074 301,487 1,762,565 1,597,311 165,255 1,098,997 962,764 136,233
1999 3,437,180 3,224,301 212,878 2,262,505 2,088,544 173,962 1,174,674 1,135,757 38,917
2000 4,922,927 4,698,192 224,734 3,560,671 3,330,417 230,254 1,362,255 1,367,775 -5,519
2001 4,688,530 4,393,114 295,416 2,736,933 2,609,657 127,275 1,951,597 1,783,456 168,141
2002 4,018,969 3,807,392 211,578 2,176,363 2,141,754 34,609 1,842,606 1,665,638 176,968
2003 4,281,605 3,998,766 282,840 2,054,379 1,884,711 169,667 2,227,227 2,114,054 113,173
2004 4,310,180 4,019,273 290,907 2,390,924 2,198,578 192,346 1,919,256 1,820,695 98,561
2005 4,834,374 4,532,166 302,208 2,765,100 2,610,805 154,296 2,069,274 1,921,362 147,912
2006 5,737,379 5,398,123 339,257 3,330,068 3,172,237 157,832 2,407,311 2,225,886 181,425
2007 7,099,174 6,721,565 377,609 3,836,033 3,733,373 102,660 3,263,141 2,988,192 274,949
2008 7,353,803 7,295,224 58,579 3,656,331 3,716,025 -59,694 3,697,472 3,579,199 118,273
2009 6,935,792 6,454,757 481,034 2,645,445 2,543,650 101,796 4,290,346 3,911,108 379,239
2010 7,297,941 6,846,704 451,238 2,781,498 2,736,478 45,019 4,516,444 4,110,225 406,219
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 34
Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Equity Mutual Funds
Millions of dollars, annual
Total portfolio Common stock Other securities
Year Purchases Sales Net purchases Purchases Sales Net purchases Purchases Sales Net purchases
1986 $129,723 $111,233 $18,491 $110,016 $96,512 $13,504 $19,708 $14,721 $4,987
1987 196,902 175,292 21,611 170,715 150,705 20,009 26,188 24,586 1,601

U.S. LONG-TERM MUTUAL FUNDS

1988 119,861 130,821 -10,959 100,888 113,635 -12,747 18,973 17,186 1,788
1989 148,346 144,753 3,593 128,998 127,026 1,973 19,348 17,728 1,621
1990 187,592 169,373 18,218 151,907 133,630 18,277 35,684 35,743 -59
1991 251,775 207,946 43,829 224,117 186,785 37,333 27,658 21,162 6,496
1992 339,002 268,868 70,134 300,712 242,319 58,393 38,290 26,549 11,741
1993 500,197 382,432 117,765 451,485 345,357 106,128 48,712 37,075 11,637
1994 618,004 508,389 109,615 564,380 456,708 107,672 53,623 51,681 1,942
1995 785,867 678,060 107,807 718,298 621,699 96,599 67,569 56,361 11,208
1996 1,116,906 896,644 220,262 1,050,884 832,486 218,397 66,022 64,157 1,865
1997 1,421,211 1,223,463 197,748 1,352,085 1,166,649 185,436 69,126 56,814 12,312
1998 1,723,752 1,557,212 166,540 1,635,842 1,475,384 160,458 87,909 81,827 6,082
1999 2,232,821 2,049,539 183,282 2,126,853 1,941,504 185,349 105,968 108,035 -2,067
2000 3,537,394 3,286,115 251,279 3,396,792 3,152,518 244,274 140,601 133,597 7,005
2001 2,731,622 2,616,107 115,516 2,576,761 2,469,082 107,679 154,861 147,025 7,837
2002 2,156,882 2,126,447 30,435 2,022,673 2,006,165 16,507 134,210 120,282 13,927
2003 1,991,674 1,839,642 152,033 1,912,286 1,761,500 150,786 79,388 78,142 1,246
2004 2,305,788 2,128,510 177,277 2,225,256 2,057,243 168,012 80,532 71,267 9,265
2005 2,704,427 2,545,505 158,923 2,601,659 2,456,261 145,398 102,768 89,243 13,525
2006 3,269,410 3,093,807 175,603 3,146,149 2,977,000 169,149 123,261 116,807 6,454
2007 3,792,135 3,671,456 120,679 3,591,688 3,484,353 107,335 200,447 187,103 13,344
2008 3,628,851 3,698,468 -69,617 3,345,555 3,413,847 -68,292 283,296 284,621 -1,326
2009 2,779,699 2,704,572 75,127 2,431,202 2,341,175 90,027 348,497 363,398 -14,900
2010 2,843,370 2,853,003 -9,634 2,550,676 2,523,970 26,706 292,693 329,033 -36,339
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

161
Data Section 3
 Data Section 3

162
TABLE 35
Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Hybrid Mutual Funds
Millions of dollars, annual
Total portfolio Common stock Other securities
Year Purchases Sales Net purchases Purchases Sales Net purchases Purchases Sales Net purchases
1986 $34,746 $28,007 $6,739 $21,894 $19,451 $2,443 $12,853 $8,556 $4,297
1987 48,335 44,168 4,168 26,282 23,989 2,293 22,053 20,179 1,874
1988 28,070 31,455 -3,384 10,628 13,833 -3,205 17,442 17,622 -179
1989 26,747 24,864 1,883 12,459 13,598 -1,139 14,288 11,266 3,022
1990 31,003 27,042 3,961 13,329 11,849 1,480 17,674 15,192 2,481
1991 42,937 34,656 8,281 18,658 15,435 3,223 24,279 19,221 5,058
1992 64,429 43,855 20,574 23,966 17,200 6,766 40,463 26,655 13,809
1993 116,821 74,135 42,686 49,689 30,490 19,200 67,131 43,645 23,486
1994 141,268 114,962 26,306 54,812 46,429 8,383 86,456 68,533 17,923
1995 189,989 180,066 9,923 67,628 60,612 7,016 122,360 119,454 2,907
1996 233,471 211,094 22,377 92,495 88,487 4,008 140,976 122,607 18,370
1997 266,438 245,278 21,160 98,115 94,990 3,125 168,323 150,288 18,036
1998 290,682 266,334 24,347 115,714 111,414 4,300 174,967 154,920 20,047
1999 303,946 304,642 -696 128,313 138,952 -10,639 175,633 165,690 9,943
2000 317,617 339,135 -21,517 156,082 168,520 -12,438 161,536 170,615 -9,079
2001 360,107 337,367 22,740 152,177 132,093 20,084 207,930 205,274 2,656
2002 340,543 321,258 19,285 142,241 124,414 17,828 198,302 196,844 1,457
2003 360,701 318,785 41,916 129,370 111,743 17,628 231,330 207,042 24,288
2004 412,952 353,738 59,215 156,504 130,888 25,616 256,449 222,850 33,599
2005 389,769 350,637 39,132 157,039 147,680 9,359 232,730 202,957 29,773
2006 391,070 372,393 18,678 176,560 187,855 -11,296 214,511 184,537 29,973
2007 523,170 477,541 45,629 234,408 238,103 -3,695 288,763 239,439 49,324
2008 613,713 594,658 19,055 300,647 289,092 11,555 313,066 305,566 7,500
2009 465,631 432,974 32,657 203,898 194,760 9,138 261,733 238,213 23,519
2010 496,461 452,279 44,182 211,796 197,484 14,311 284,665 254,795 29,871
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 36
Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Bond Mutual Funds
Millions of dollars, annual
Total portfolio Common stock Other securities
Year Purchases Sales Net purchases Purchases Sales Net purchases Purchases Sales Net purchases
1986 $336,127 $225,848 $110,279 $2,537 $2,062 $475 $333,590 $223,785 $109,805
1987 285,363 265,812 19,551 1,862 1,310 553 283,501 264,502 18,999

U.S. LONG-TERM MUTUAL FUNDS

1988 262,577 258,947 3,630 1,226 1,347 -121 261,351 257,600 3,751
1989 296,651 275,836 20,815 1,314 1,071 243 295,337 274,765 20,572
1990 336,125 309,364 26,761 1,161 1,101 60 334,964 308,264 26,700
1991 440,962 365,509 75,453 7,514 7,056 457 433,449 358,453 74,996
1992 545,934 445,752 100,182 2,840 2,338 502 543,095 443,414 99,680
1993 718,488 603,793 114,694 5,538 5,009 529 712,950 598,785 114,165
1994 674,467 705,973 -31,506 9,475 9,209 266 664,991 696,764 -31,773
1995 574,655 542,576 32,079 4,091 4,445 -354 570,564 538,131 32,433
1996 667,876 629,146 38,730 7,884 6,292 1,591 659,992 622,854 37,139
1997 696,990 640,240 56,750 7,184 7,344 -160 689,806 632,896 56,910
1998 847,129 736,529 110,600 11,009 10,512 496 836,120 726,016 110,104
1999 900,413 870,121 30,292 7,339 8,088 -749 893,074 862,033 31,041
2000 1,067,916 1,072,943 -5,027 7,797 9,380 -1,582 1,060,118 1,063,563 -3,445
2001 1,596,800 1,439,640 157,160 7,994 8,482 -488 1,588,806 1,431,158 157,648
2002 1,521,544 1,359,686 161,858 11,449 11,175 274 1,510,095 1,348,512 161,584
2003 1,929,230 1,840,339 88,892 12,722 11,469 1,254 1,916,508 1,828,870 87,638
2004 1,591,441 1,537,025 54,415 9,165 10,447 -1,282 1,582,276 1,526,578 55,698
2005 1,740,178 1,636,024 104,153 6,402 6,863 -461 1,733,776 1,629,161 104,615
2006 2,076,899 1,931,923 144,976 7,360 7,382 -22 2,069,539 1,924,541 144,998
2007 2,783,868 2,572,567 211,301 9,937 10,918 -981 2,773,931 2,561,650 212,281
2008 3,111,239 3,002,098 109,141 10,129 13,087 -2,958 3,101,110 2,989,011 112,099
2009 3,690,462 3,317,212 373,250 10,345 7,715 2,631 3,680,116 3,309,497 370,620
2010 3,958,111 3,541,421 416,690 19,026 15,024 4,002 3,939,085 3,526,398 412,687
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

163
Data Section 3
 TABLE 37
Total Net Assets and Number of Shareholder Accounts of Money Market Funds by Type
of Fund
Year-end
Total net assets Number of shareholder accounts*
Millions of dollars Thousands

Taxable Taxable
Non- Tax- Non- Tax-
Year Total Government government exempt Total Government government exempt
1986 $292,152 $63,736 $164,610 $63,806 16,313 2,397 13,256 660
1987 316,096 67,589 187,087 61,420 17,675 2,484 14,348 842
1988 337,954 61,298 210,897 65,758 18,570 1,684 15,947 939
1989 428,093 74,685 283,939 69,470 21,314 1,814 18,359 1,141
1990 498,341 109,376 305,189 83,777 22,969 2,283 19,294 1,391
1991 542,442 138,111 314,346 89,984 23,556 2,557 19,306 1,693
1992 546,194 151,043 300,310 94,841 23,647 2,826 18,945 1,876
1993 565,319 149,180 312,701 103,439 23,585 2,806 18,780 1,999
1994 611,005 148,139 352,972 109,894 25,379 3,047 20,295 2,037
1995 753,018 181,494 449,829 121,695 30,137 3,823 24,042 2,271
1996 901,807 223,790 540,146 137,871 32,200 4,241 25,688 2,271
1997 1,058,886 254,223 647,005 157,658 35,624 4,643 28,342 2,638
1998 1,351,678 312,907 854,061 184,711 38,847 4,452 32,009 2,386
1999 1,613,146 333,726 1,079,523 199,897 43,616 4,843 36,344 2,428
2000 1,845,248 359,166 1,252,212 233,869 48,138 4,941 40,548 2,649
2001 2,285,310 463,764 1,562,465 259,081 47,236 6,792 37,632 2,811
Data Section 4

2002 2,265,075 455,507 1,533,271 276,297 45,380 6,800 35,925 2,655

2003 2,040,022 410,481 1,339,249 290,291 41,214 5,960 32,451 2,803
2004 1,901,336 380,238 1,209,099 311,999 37,636 5,619 29,174 2,843
2005 2,026,822 399,892 1,290,557 336,373 36,837 5,530 28,501 2,806
2006 2,338,451 426,819 1,542,603 369,029 37,067 4,297 29,707 3,063
2007 3,085,760 759,934 1,857,735 468,092 39,130 4,682 30,978 3,469
2008 3,832,236 1,489,740 1,848,817 493,680 38,111 5,410 29,087 3,614
2009 3,315,893 1,106,879 1,810,078 398,935 33,466 5,308 24,992 3,166
2010 2,803,922 855,021 1,618,896 330,006 30,606 4,511 22,924 3,171
* Number of shareholder accounts includes a mix of individual and omnibus accounts.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

164 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 38
Number of Funds and Number of Share Classes of Money Market Funds by Type of Fund
Year-end
Number of funds Number of share classes
Taxable Taxable
Non- Tax- Non- Tax-
Year Total Government government exempt Total Government government exempt
1986 487 147 213 127 487 147 213 127
1987 543 154 235 154 543 154 235 154
1988 610 159 274 177 610 159 274 177
1989 673 160 310 203 673 160 310 203
1990 741 176 329 236 762 183 339 240
1991 820 211 341 268 871 228 363 280
1992 864 235 350 279 914 248 368 298
1993 920 265 362 293 1,009 286 386 337
1994 963 276 373 314 1,261 368 490 403
1995 997 284 392 321 1,380 404 549 427
1996 988 277 392 319 1,453 413 592 448
1997 1,013 279 406 328 1,549 442 633 474
1998 1,026 277 410 339 1,627 462 675 490
1999 1,045 281 423 341 1,730 488 742 500
2000 1,039 276 428 335 1,855 533 798 524
2001 1,015 272 418 325 1,948 575 830 543
2002 988 262 415 311 2,006 582 881 543
2003 973 253 407 313 2,031 575 887 569

Data Section 4
2004 942 242 395 305 2,046 580 890 576
2005 870 223 370 277 2,031 572 892 567
2006 847 216 357 274 2,012 576 878 558
2007 805 202 343 260 2,018 568 880 570
2008 783 198 336 249 1,988 577 868 543
2009 704 179 297 228 1,849 560 772 517
2010 652 165 277 210 1,783 544 739 500
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

U.S. MONEY MARKET FUNDS 165

 Data Section 4

166
TABLE 39
Total Net Assets of Money Market Funds by Type of Fund
Millions of dollars, year-end
All money market funds Retail money market funds Institutional money market funds
Taxable Taxable Taxable
Non- Tax- Non- Tax- Non- Tax-
Year Total Government government exempt Total Government government exempt Total Government government exempt
1996 $901,807 $223,790 $540,146 $137,871 $592,604 $94,786 $387,705 $110,113 $309,203 $129,003 $152,441 $27,758
1997 1,058,886 254,223 647,005 157,658 663,408 100,991 439,670 122,747 395,478 153,232 207,334 34,911
1998 1,351,678 312,907 854,061 184,711 835,255 121,664 571,465 142,126 516,423 191,243 282,596 42,585
1999 1,613,146 333,726 1,079,523 199,897 964,686 132,915 675,986 155,785 648,460 200,812 403,537 44,111
2000 1,845,248 359,166 1,252,212 233,869 1,061,923 141,122 741,762 179,039 783,325 218,044 510,450 54,830
2001 2,285,310 463,764 1,562,465 259,081 1,132,956 167,712 775,760 189,484 1,152,354 296,052 786,706 69,597
2002 2,265,075 455,507 1,533,271 276,297 1,062,103 154,460 715,618 192,025 1,202,973 301,047 817,653 84,272
2003 2,040,022 410,481 1,339,249 290,291 935,557 138,621 606,324 190,612 1,104,465 271,860 732,926 99,679
2004 1,901,336 380,238 1,209,099 311,999 849,472 123,964 533,714 191,794 1,051,864 256,274 675,385 120,205
2005 2,026,822 399,892 1,290,557 336,373 872,557 123,763 545,389 203,406 1,154,265 276,129 745,168 132,968
2006 2,338,451 426,819 1,542,603 369,029 1,004,092 138,218 641,830 224,043 1,334,359 288,601 900,773 144,986
2007 3,085,760 759,934 1,857,735 468,092 1,220,122 182,423 752,109 285,590 1,865,639 577,511 1,105,626 182,503
2008 3,832,236 1,489,740 1,848,817 493,680 1,361,966 285,658 773,095 303,212 2,470,271 1,204,082 1,075,722 190,467
2009 3,315,893 1,106,879 1,810,078 398,935 1,068,659 204,095 629,219 235,345 2,247,234 902,784 1,180,860 163,590
2010 2,803,922 855,021 1,618,896 330,006 945,332 178,256 561,132 205,944 1,858,590 676,764 1,057,763 124,062
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 40
Net New Cash Flow of Money Market Funds by Type of Fund
Millions of dollars, annual
All money market funds Retail money market funds Institutional money market funds
Taxable Taxable Taxable
Non- Tax- Non- Tax- Non- Tax-

U.S. MONEY MARKET FUNDS

Year Total Government government exempt Total Government government exempt Total Government government exempt
1996 $89,422 $20,572 $58,935 $9,915 $52,886 $6,181 $39,505 $7,200 $36,536 $14,391 $19,430 $2,715
1997 103,466 20,129 69,107 14,231 46,620 4,781 32,081 9,758 56,846 15,347 37,026 4,473
1998 235,457 45,178 167,909 22,370 130,992 15,835 100,428 14,728 104,465 29,343 67,481 7,642
1999 193,681 8,486 174,957 10,238 82,006 -757 72,935 9,827 111,675 9,243 102,021 411
2000 159,365 14,494 118,308 26,563 43,623 -727 25,679 18,672 115,741 15,222 92,629 7,891
2001 375,291 85,910 268,040 21,340 36,262 12,714 13,530 10,017 339,029 73,196 254,510 11,323
2002 -45,937 -10,923 -51,268 16,254 -80,690 -10,530 -71,489 1,328 34,753 -393 20,220 14,925
2003 -263,403 -52,327 -220,850 9,774 -151,649 -20,771 -125,971 -4,908 -111,754 -31,556 -94,880 14,682
2004 -156,713 -35,584 -139,155 18,027 -88,836 -15,716 -75,555 2,434 -67,876 -19,869 -63,600 15,592
2005 62,082 13,115 28,075 20,891 2,202 -3,674 -4,912 10,788 59,880 16,790 32,988 10,103
2006 245,236 19,041 200,763 25,432 96,174 9,616 70,533 16,024 149,062 9,425 130,230 9,408
2007 654,476 319,127 251,327 84,022 171,269 38,044 82,532 50,693 483,207 281,082 168,795 33,329
2008 637,122 697,455 -73,532 13,198 112,595 97,393 1,476 13,727 524,526 600,063 -75,008 -528
2009 -539,139 -414,767 -28,741 -95,631 -308,729 -104,306 -136,829 -67,595 -230,410 -310,461 108,088 -28,036
2010 -524,658 -253,927 -201,359 -69,372 -125,283 -27,218 -69,667 -28,398 -399,375 -226,708 -131,692 -40,975
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

167
Data Section 4
 TABLE 41
Net New Cash Flow and Components of Net New Cash Flow of Money Market Funds
Millions of dollars, annual
Sales Redemptions
Net new New + Regular +
Year cash flow 1 exchange New 2 Exchange 3 exchange Regular4 Exchange 5
1986 $33,552 $1,026,745 $978,041 $48,704 $993,193 $948,656 $44,537
1987 10,072 1,147,877 1,049,034 98,843 1,137,805 1,062,671 75,133
1988 106 1,130,639 1,066,003 64,636 1,130,534 1,074,346 56,188
1989 64,132 1,359,616 1,296,458 63,158 1,295,484 1,235,527 59,957
1990 23,179 1,461,537 1,389,439 72,098 1,438,358 1,372,764 65,594
1991 6,068 1,841,131 1,778,491 62,640 1,835,063 1,763,106 71,957
1992 -16,006 2,449,766 2,371,925 77,841 2,465,772 2,382,976 82,796
1993 -13,890 2,756,282 2,665,987 90,295 2,770,172 2,673,464 96,707
1994 8,525 2,725,201 2,586,478 138,722 2,716,675 2,599,400 117,275
1995 89,381 3,234,216 3,097,225 136,990 3,144,834 3,001,968 142,866
1996 89,422 4,156,985 3,959,014 197,971 4,067,563 3,868,772 198,791
1997 103,466 5,127,328 4,894,226 233,102 5,023,863 4,783,096 240,767
1998 235,457 6,407,574 6,129,140 278,434 6,172,116 5,901,590 270,526
1999 193,681 8,080,959 7,719,310 361,649 7,887,278 7,540,912 346,367
2000 159,365 9,826,677 9,406,287 420,391 9,667,312 9,256,350 410,962
2001 375,291 11,737,291 11,426,804 310,487 11,362,000 11,065,468 296,533
2002 -45,937 12,008,801 11,712,587 296,215 12,054,738 11,783,209 271,530
2003 -263,403 11,177,118 10,952,544 224,574 11,440,521 11,213,929 226,592
2004 -156,713 10,860,499 10,694,008 166,492 11,017,212 10,846,935 170,277
Data Section 4

2005 62,082 12,493,663 12,317,518 176,145 12,431,581 12,260,802 170,779

2006 245,236 15,707,260 15,496,005 211,256 15,462,024 15,269,381 192,643
2007 654,476 21,315,157 21,040,070 275,087 20,660,681 20,409,373 251,307
2008 637,122 24,452,449 24,067,390 385,059 23,815,327 23,498,664 316,663
2009 -539,139 18,683,752 18,489,354 194,399 19,222,891 19,012,375 210,516
2010 -524,658 15,771,387 15,670,167 101,220 16,296,045 16,191,487 104,558
1 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
2 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through
reinvestment of dividends in existing accounts.
3 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
4 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
5 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

168 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 42
Paid and Reinvested Dividends of Money Market Funds by Type of Fund
Millions of dollars, annual
Paid dividends Reinvested dividends
Taxable Tax-exempt Taxable Tax-exempt
money market money market money market money market
Year Total funds funds Total funds funds
1986 $14,832 $12,432 $2,400 $11,514 $9,981 $1,533
1987 15,654 12,833 2,821 11,946 10,136 1,810
1988 21,618 17,976 3,642 15,692 13,355 2,337
1989 28,619 24,683 3,936 23,050 20,294 2,756
1990 30,258 26,448 3,810 26,282 23,226 3,056
1991 28,604 25,121 3,483 22,809 19,998 2,811
1992 20,280 17,197 3,083 14,596 12,567 2,029
1993 18,991 15,690 3,302 11,615 10,007 1,607
1994 23,737 20,504 3,233 16,739 14,626 2,113
1995 37,038 32,855 4,183 27,985 24,873 3,111
1996 42,555 38,446 4,108 31,516 28,448 3,068
1997 48,843 44,185 4,658 37,979 34,425 3,554
1998 57,375 52,164 5,211 43,443 39,580 3,863
1999 69,004 63,229 5,775 50,648 46,602 4,046
2000 98,219 90,154 8,064 72,771 66,887 5,884
2001 79,307 73,361 5,946 56,367 51,949 4,418
2002 32,251 29,397 2,854 22,033 19,940 2,093
2003 17,041 15,124 1,917 11,314 9,916 1,398

Data Section 4
2004 18,374 15,891 2,482 11,883 10,077 1,807
2005 50,186 43,547 6,639 32,803 27,951 4,852
2006 96,425 85,020 11,405 61,489 53,268 8,220
2007 127,908 113,178 14,730 82,457 71,938 10,519
2008 93,858 82,727 11,130 61,135 53,455 7,680
2009 18,619 16,590 2,030 11,035 9,999 1,037
2010 7,171 6,718 453 4,461 4,209 252
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

U.S. MONEY MARKET FUNDS 169

 Data Section 4

170
TABLE 43
Asset Composition of Taxable Government Money Market Funds as a Percentage of Total Net Assets
Year-end
Total net
assets U.S. Other U.S. Average
Millions of Treasury Treasury government Repurchase Certificates Eurodollar Commercial Bank Corporate Other maturity
Year dollars bills securities agency issues agreements of deposit CDs paper notes 1 notes 2 assets 3 Days
1986 $63,736 22.8% 7.9% 14.4% 39.1% 4.1% 4.9% 4.3% – – 2.5% 51
1987 67,589 4.6 11.2 22.0 44.9 4.8 7.4 4.0 – – 1.1 35
1988 61,298 5.0 9.7 20.5 58.4 1.2 0.1 3.2 – – 2.0 28
1989 74,685 5.0 6.9 20.6 62.7 0.2 0.1 3.0 – – 1.5 31
1990 109,376 11.1 12.2 20.6 45.7 0.0 0.0 0.3 – – 9.9 46
1991 138,111 21.5 16.5 20.3 40.9 0.0 0.0 0.4 – – 0.3 58
1992 151,043 26.0 16.5 21.6 34.7 0.0 0.0 0.5 – – 0.6 55
1993 149,180 30.3 14.1 20.7 32.8 0.0 0.0 0.3 – – 1.8 61
1994 148,139 24.4 12.6 26.3 34.0 0.0 0.0 0.4 0.0% – 2.2 37
1995 181,494 19.8 13.9 28.5 34.1 0.0 0.0 0.5 0.0 – 3.1 48
1996 223,790 17.7 18.5 25.4 35.2 0.0 0.1 0.7 0.0 – 2.4 49
1997 254,223 15.2 17.6 25.1 37.8 0.1 0.0 1.2 0.1 – 2.9 50
1998 312,907 14.3 17.7 30.4 33.4 0.3 0.0 1.7 0.1 0.2% 2.0 52
1999 333,726 17.1 13.0 37.1 28.2 0.1 0.0 1.4 0.1 1.1 1.9 48
2000 359,166 14.5 10.3 31.7 37.2 0.0 0.0 2.1 0.1 1.2 2.9 45
2001 463,764 19.1 9.1 34.4 31.6 0.2 0.0 0.7 0.0 1.7 3.2 55
2002 455,507 20.3 6.4 33.1 35.4 0.1 0.0 0.8 0.0 1.7 2.1 52
2003 410,481 19.9 7.2 33.9 36.2 0.3 0.0 0.9 0.0 1.9 -0.3 52
2004 380,238 21.3 4.9 34.6 35.9 0.2 0.0 0.9 0.1 0.9 1.2 36
2005 399,892 15.8 4.4 28.1 49.9 0.0 0.0 0.3 0.1 0.8 0.6 27
2006 426,819 14.9 4.0 21.6 58.6 0.1 0.0 0.4 0.0 0.1 0.3 32
2007 759,934 16.3 5.1 24.1 53.7 0.3 0.0 0.2 0.0 0.0 0.2 31
2008 1,489,740 30.5 6.2 36.2 26.8 0.0 0.0 0.1 0.1 0.2 -0.1 48
2009 1,106,879 25.6 6.0 35.4 30.6 0.0 0.0 1.0 0.2 0.3 0.7 47
2010 855,021 22.9 8.5 33.3 33.0 0.0 0.0 0.9 0.1 0.4 0.9 47
1 Prior to 1994, bank notes are included in other assets.
2 Prior to 1998, corporate notes are included in other assets.
3 Other assets include banker’s acceptances, municipal securities, and cash reserves.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to 100 percent because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 44
Asset Composition of Taxable Non-Government Money Market Funds as a Percentage of Total Net Assets
Year-end
Total net
assets U.S. Other U.S. Average
Millions of Treasury Treasury government Repurchase Certificates Eurodollar Commercial Bank Corporate Other maturity
Year dollars bills securities agency issues agreements of deposit CDs paper notes 1 notes 2 assets 3 Days

U.S. MONEY MARKET FUNDS

1986 $164,610 3.6% 1.6% 3.6% 4.4% 10.0% 11.6% 56.0% – – 9.3% 42
1987 187,087 1.0 0.9 6.5 4.8 16.2 8.9 52.3 – – 9.4 34
1988 210,897 1.0 0.2 2.8 2.8 15.2 14.1 54.6 – – 9.4 32
1989 283,939 1.3 0.8 2.0 2.8 14.4 9.3 62.3 – – 7.1 43
1990 305,189 4.4 2.2 4.7 2.9 6.9 8.9 65.5 – – 4.7 48
1991 314,346 5.7 2.9 4.2 3.7 10.6 6.9 60.1 – – 5.8 56
1992 300,310 2.7 2.5 7.5 4.9 10.4 6.9 57.7 – – 7.4 59
1993 312,701 2.6 2.4 11.9 5.9 8.0 3.2 52.6 – – 13.3 58
1994 352,972 2.4 1.3 11.4 5.6 6.4 4.5 53.4 2.4% – 12.7 38
1995 449,829 1.4 0.9 9.2 6.2 8.9 4.5 52.5 3.7 – 12.7 60
1996 540,146 0.5 1.6 9.0 5.1 12.8 4.3 51.0 2.3 – 13.5 56
1997 647,005 0.4 0.5 5.4 5.3 14.7 3.7 52.0 3.2 – 14.8 57
1998 854,061 0.4 0.8 9.6 4.6 13.0 3.6 48.7 3.9 5.8% 9.6 58
1999 1,079,523 0.3 0.3 6.8 4.8 12.8 3.9 49.2 3.1 8.4 10.4 49
2000 1,252,212 0.3 0.1 6.2 4.3 11.6 6.5 50.4 3.6 10.4 6.5 53
2001 1,562,465 0.5 0.3 12.3 5.9 15.0 7.3 41.7 1.5 11.0 4.5 58
2002 1,533,271 1.3 0.3 11.8 8.1 13.8 7.0 40.1 1.4 12.0 4.3 54
2003 1,339,249 1.4 0.3 14.9 8.1 11.6 5.1 35.6 2.0 16.2 4.6 59
2004 1,209,099 0.3 0.1 11.9 8.5 14.1 5.8 33.9 2.6 17.9 4.9 41
2005 1,290,557 0.6 0.1 4.1 11.9 14.5 6.0 38.5 2.3 17.9 4.0 38
2006 1,542,603 0.1 0.2 2.9 9.9 13.9 4.4 39.6 2.2 21.6 5.2 49
2007 1,857,735 0.8 0.2 3.1 11.3 15.2 5.5 36.9 4.0 16.7 6.3 44
2008 1,848,817 1.9 0.5 12.7 8.4 21.5 4.7 34.1 3.1 9.3 3.8 47
2009 1,810,078 2.3 1.3 8.9 8.3 31.6 5.5 28.1 2.9 6.4 4.8 50
2010 1,618,896 2.7 1.9 7.8 12.8 28.6 6.7 24.3 3.2 6.2 5.8 44
1 Prior to 1994, bank notes are included in other assets.
2 Prior to 1998, corporate notes are included in other assets.
3 Other assets include banker’s acceptances, municipal securities, and cash reserves.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

171
Components may not add to 100 percent because of rounding.

Data Section 4
 Data Section 5

172
TABLE 45
Funds of Funds:1 Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes
Total net assets Net new cash flow 2 Number of funds Number of share classes
Millions of dollars, year-end Millions of dollars, annual Year-end Year-end
Hybrid Hybrid Hybrid Hybrid
Year Total Equity and bond Total Equity and bond Total Equity and bond Total Equity and bond
1990 $1,426 $211 $1,215 $131 -$21 $152 20 11 9 20 11 9
1991 2,313 403 1,910 475 97 378 20 10 10 20 10 10
1992 3,722 651 3,072 1,134 205 929 21 10 11 21 10 11
1993 5,403 900 4,503 1,160 154 1,006 24 12 12 24 12 12
1994 6,170 1,367 4,803 567 342 225 32 15 17 32 15 17
1995 9,063 2,288 6,774 1,135 633 502 36 19 17 37 19 18
1996 13,404 4,596 8,808 2,457 1,572 885 45 24 21 56 28 28
1997 21,480 7,580 13,900 3,380 1,617 1,763 94 41 53 148 58 90
1998 35,368 12,212 23,156 6,376 2,006 4,370 175 75 100 305 112 193
1999 48,310 18,676 29,634 6,572 3,392 3,180 212 83 129 394 137 257
2000 56,911 16,206 40,704 10,401 5,101 5,300 215 86 129 414 143 271
2001 63,385 15,756 47,629 8,929 1,858 7,072 213 85 128 450 154 296
2002 68,960 14,403 54,557 11,593 2,097 9,496 268 103 165 625 194 431
2003 123,091 28,509 94,582 29,900 4,780 25,120 301 111 190 720 214 506
2004 199,552 41,784 157,768 50,520 8,022 42,497 375 111 264 963 223 740
2005 306,016 58,569 247,447 79,480 8,708 70,772 475 129 346 1,298 273 1,025
2006 469,597 94,939 374,658 101,324 18,461 82,862 603 160 443 1,859 337 1,522
2007 637,026 114,565 522,461 126,326 18,153 108,173 720 173 547 2,358 393 1,965
2008 486,586 75,122 411,464 61,547 7,606 53,941 862 181 681 2,814 415 2,399
2009 672,720 72,264 600,456 69,429 7,543 61,886 932 172 760 3,000 412 2,588
2010 928,169 124,411 803,757 134,219 24,006 110,213 964 183 781 3,095 433 2,662
1 Funds of funds are mutual funds that invest primarily in other mutual funds.
2 Net
new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 46
Funds of Funds:1 Components of Net New Cash Flow2
Millions of dollars, annual
Sales Redemptions
New + exchange New 3 Exchange 4 Regular + exchange Regular 5 Exchange 6
Hybrid Hybrid Hybrid Hybrid Hybrid Hybrid
and and and and and and
Year Total Equity bond Total Equity bond Total Equity bond Total Equity bond Total Equity bond Total Equity bond
1990 $416 $68 $348 $351 $58 $293 $65 $10 $55 $285 $89 $196 $186 $87 $99 $100 $3 $97
1991 772 192 580 579 142 437 194 50 143 298 95 203 185 79 105 113 16 97
1992 1,617 371 1,246 1,255 294 961 362 76 286 483 166 318 303 130 174 180 36 144
1993 1,953 358 1,594 1,533 293 1,240 419 65 354 793 205 588 453 156 297 340 49 291

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

1994 1,781 583 1,197 1,341 389 952 439 194 245 1,213 241 972 682 166 517 531 75 456
1995 2,362 987 1,376 1,750 692 1,059 612 295 317 1,227 354 873 768 233 535 459 121 338
1996 4,522 2,321 2,201 3,621 1,847 1,774 901 474 428 2,066 749 1,317 1,290 519 771 776 230 546
1997 6,317 2,858 3,459 4,753 2,017 2,736 1,565 842 723 2,937 1,241 1,696 1,749 774 975 1,189 468 721
1998 12,931 4,398 8,532 9,938 3,578 6,360 2,993 821 2,172 6,554 2,392 4,162 3,766 1,541 2,225 2,788 850 1,938
1999 16,749 6,861 9,888 12,759 5,575 7,184 3,990 1,287 2,703 10,177 3,469 6,708 6,638 2,553 4,084 3,540 916 2,624
2000 24,092 9,346 14,746 18,607 7,539 11,068 5,485 1,806 3,678 13,690 4,245 9,445 9,250 3,199 6,052 4,440 1,046 3,394
2001 22,577 5,735 16,842 17,606 4,893 12,712 4,971 842 4,129 13,647 3,877 9,770 9,546 3,111 6,435 4,101 766 3,335
2002 28,193 6,780 21,414 23,063 5,787 17,276 5,131 993 4,138 16,600 4,683 11,917 12,209 3,865 8,344 4,391 818 3,573
2003 46,962 8,711 38,251 38,444 7,260 31,184 8,518 1,451 7,068 17,062 3,931 13,131 12,785 3,276 9,509 4,277 655 3,622
2004 76,821 13,709 63,112 63,136 11,451 51,685 13,685 2,258 11,427 26,301 5,687 20,614 19,845 4,809 15,036 6,456 878 5,578
2005 122,861 16,760 106,102 106,077 13,986 92,091 16,784 2,774 14,010 43,381 8,052 35,329 35,351 7,034 28,317 8,030 1,018 7,012
2006 163,087 30,201 132,885 138,852 24,854 113,998 24,234 5,347 18,888 61,763 11,740 50,023 49,046 10,057 38,990 12,717 1,683 11,033
2007 226,953 37,327 189,626 193,609 29,870 163,739 33,343 7,457 25,887 100,627 19,174 81,453 81,950 15,842 66,108 18,676 3,331 15,345
2008 214,547 33,545 181,002 183,647 27,822 155,825 30,900 5,723 25,177 153,000 25,938 127,061 121,254 20,978 100,276 31,746 4,961 26,785
2009 189,563 26,453 163,110 170,197 24,274 145,923 19,366 2,180 17,187 120,134 18,910 101,224 101,658 16,954 84,704 18,476 1,956 16,520
2010 307,649 46,771 260,879 282,275 45,152 237,123 25,374 1,619 23,756 173,430 22,764 150,666 151,321 20,890 130,432 22,109 1,875 20,234
1 Funds of funds are mutual funds that invest primarily in other mutual funds.
2 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
3 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
4 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
5 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
6 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Components may not add to the total because of rounding.

173
Data Section 5
 Data Section 5

174
TABLE 47
Index Mutual Funds: Total Net Assets and Net New Cash Flow
Millions of dollars
Total net assets Net new cash flow*
Year-end Annual
Equity Equity
Other Global/ Hybrid Other Global/ Hybrid
Year Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond
1993 $27,460 $19,445 $3,338 $1,281 $3,396 $6,350 $3,916 $953 $501 $980
1994 32,078 22,257 3,863 2,095 3,863 3,298 1,821 515 436 525
1995 57,042 41,744 6,442 2,846 6,009 11,808 8,816 1,038 512 1,442
1996 97,759 73,856 11,241 4,124 8,538 24,780 18,447 3,192 1,033 2,108
1997 170,302 129,857 21,221 5,329 13,894 34,847 25,208 5,230 818 3,591
1998 264,998 201,791 35,051 7,962 20,193 46,143 30,977 8,499 1,568 5,099
1999 387,411 284,588 63,386 13,130 26,307 61,603 38,063 16,102 2,241 5,197
2000 384,039 272,462 72,028 12,625 26,923 25,592 10,783 10,672 1,660 2,477
2001 370,560 249,452 73,598 11,128 36,381 26,735 9,113 8,846 1,194 7,582
2002 327,417 200,989 69,426 11,050 45,952 25,255 4,818 12,152 1,669 6,616
2003 455,293 273,691 112,469 18,218 50,903 35,234 14,231 16,537 2,199 2,266
2004 554,044 317,826 147,819 28,236 60,163 40,130 11,739 16,078 5,661 6,651
2005 618,699 334,012 171,377 42,792 70,518 27,877 -317 11,731 8,456 8,007
2006 747,468 379,765 218,303 66,647 82,752 32,974 -5,908 20,283 10,674 7,925
2007 854,715 394,593 257,935 95,667 106,520 61,139 -1,440 29,095 16,903 16,582
2008 601,728 252,956 178,045 50,125 120,602 34,966 7,705 23,398 -6,003 9,866
2009 835,422 328,647 256,803 92,177 157,795 55,976 8,195 16,409 4,257 27,115
2010 1,016,713 375,949 325,767 122,385 192,612 57,560 -808 15,035 19,064 24,269
* Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 48
Index Mutual Funds: Number of Funds and Number of Share Classes
Year-end
Number of funds Number of share classes
Equity Equity
Other Global/ Hybrid Other Global/ Hybrid
Year Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond
1993 69 38 15 6 10 73 42 15 6 10
1994 81 42 17 7 15 95 53 17 10 15
1995 87 48 18 7 14 110 63 19 11 17
1996 105 60 22 7 16 143 86 25 11 21
1997 132 72 27 12 21 205 115 38 21 31

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

1998 156 86 37 15 18 252 148 52 25 27
1999 197 97 59 20 21 323 166 95 31 31
2000 271 120 100 25 26 465 221 164 42 38
2001 286 126 110 24 26 518 238 197 43 40
2002 313 132 124 28 29 578 255 221 53 49
2003 321 128 134 30 29 601 253 243 56 49
2004 328 127 146 28 27 633 262 269 55 47
2005 322 119 147 29 27 647 258 279 62 48
2006 342 125 158 33 26 697 272 304 70 51
2007 354 125 161 36 32 735 276 316 80 63
2008 359 122 164 41 32 754 278 317 95 64
2009 357 113 153 48 43 757 259 296 103 99
2010 365 111 163 49 42 776 253 306 117 100
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.

175
Data Section 5
 Data Section 5

176
TABLE 49
Index Mutual Funds: New Sales and Exchange Sales
Millions of dollars, annual
New + exchange New 1 Exchange 2
Equity Equity Equity
Other Global/ Hybrid Other Global/ Hybrid Other Global/ Hybrid
Year Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond
1993 $13,267 $8,898 $1,560 $746 $2,064 $11,208 $7,826 $1,283 $455 $1,644 $2,059 $1,072 $277 $291 $420
1994 11,850 7,976 1,283 824 1,767 10,172 7,103 1,130 579 1,361 1,677 874 153 245 405
1995 21,845 15,903 2,107 1,019 2,815 17,665 13,087 1,883 800 1,895 4,180 2,816 224 219 920
1996 42,680 31,828 4,893 1,855 4,103 34,903 26,165 4,182 1,463 3,093 7,776 5,663 711 392 1,010
1997 73,274 54,494 10,219 2,173 6,388 54,093 41,160 6,562 1,816 4,555 19,181 13,334 3,657 357 1,834
1998 102,843 75,186 15,515 3,014 9,128 79,382 59,457 11,405 2,157 6,362 23,461 15,728 4,109 857 2,767
1999 145,582 101,675 26,755 4,544 12,608 112,686 81,540 18,994 3,232 8,920 32,896 20,135 7,761 1,312 3,688
2000 136,385 92,019 29,055 6,085 9,225 107,344 75,990 20,147 4,857 6,351 29,041 16,029 8,908 1,228 2,875
2001 122,247 72,936 28,057 4,641 16,612 94,018 58,654 20,961 3,945 10,458 28,229 14,282 7,096 697 6,154
2002 127,752 68,085 34,211 5,161 20,295 99,640 57,060 24,922 4,505 13,154 28,112 11,026 9,289 656 7,141
2003 136,830 67,688 44,593 5,998 18,550 104,703 54,472 31,680 5,178 13,372 32,127 13,216 12,913 820 5,178
2004 159,310 74,967 53,947 9,403 20,992 128,162 63,371 40,622 7,915 16,253 31,148 11,597 13,325 1,488 4,739
2005 163,344 70,763 56,374 13,523 22,684 131,335 58,818 43,402 11,275 17,840 32,009 11,945 12,971 2,248 4,844
2006 189,914 69,619 73,488 19,890 26,918 152,436 59,125 57,535 16,061 19,715 37,478 10,494 15,953 3,828 7,203
2007 259,419 93,691 92,182 30,523 43,023 200,041 76,300 72,054 23,633 28,054 59,378 17,391 20,129 6,889 14,969
2008 249,585 87,086 82,210 26,262 54,027 201,213 74,133 64,794 22,358 39,928 48,371 12,953 17,416 3,903 14,099
2009 243,411 69,398 66,721 24,571 82,721 181,737 60,024 52,542 19,017 50,154 61,674 9,374 14,178 5,554 32,567
2010 279,016 70,013 84,148 50,788 74,066 212,865 59,437 64,787 31,937 56,704 66,151 10,577 19,361 18,851 17,362
1 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
2 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 50
Index Mutual Funds: Redemptions and Exchange Redemptions
Millions of dollars, annual
Regular + exchange Regular 1 Exchange 2
Equity Equity Equity
Other Global/ Hybrid Other Global/ Hybrid Other Global/ Hybrid
Year Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond Total S&P 500 domestic International and bond
1993 $6,917 $4,982 $607 $245 $1,084 $5,278 $3,996 $449 $118 $715 $1,639 $986 $158 $127 $369
1994 8,552 6,155 768 387 1,241 7,134 5,383 645 243 863 1,418 772 123 144 379
1995 10,037 7,087 1,069 507 1,373 7,723 5,732 935 337 719 2,314 1,355 135 170 654
1996 17,900 13,382 1,700 822 1,995 13,578 10,330 1,429 566 1,253 4,321 3,052 271 256 742
1997 38,427 29,286 4,988 1,355 2,797 24,753 19,824 2,468 779 1,681 13,674 9,462 2,520 576 1,116

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

1998 56,700 44,208 7,016 1,446 4,029 40,024 32,563 4,256 973 2,232 16,676 11,646 2,760 473 1,797
1999 83,979 63,612 10,653 2,303 7,411 60,809 48,336 7,050 1,276 4,146 23,170 15,276 3,603 1,027 3,265
2000 110,793 81,237 18,383 4,425 6,749 80,788 61,735 11,961 2,814 4,278 30,005 19,501 6,422 1,611 2,471
2001 95,512 63,823 19,211 3,447 9,030 68,474 47,792 12,746 2,582 5,353 27,038 16,030 6,465 865 3,677
2002 102,497 63,267 22,059 3,492 13,679 74,963 48,625 15,223 2,819 8,296 27,534 14,642 6,835 673 5,383
2003 101,596 53,457 28,056 3,800 16,284 76,804 42,814 20,548 3,407 10,035 24,792 10,643 7,508 393 6,249
2004 119,180 63,228 37,869 3,742 14,341 90,044 50,340 26,886 3,061 9,756 29,136 12,888 10,982 681 4,585
2005 135,467 71,080 44,643 5,067 14,677 102,053 54,621 32,287 4,108 11,036 33,414 16,459 12,356 959 3,641
2006 156,940 75,527 53,205 9,215 18,993 118,530 59,556 39,117 6,775 13,083 38,410 15,971 14,088 2,441 5,910
2007 198,280 95,131 63,087 13,620 26,441 141,059 71,405 43,001 10,076 16,576 57,221 23,726 20,086 3,544 9,865
2008 214,619 79,381 58,812 32,264 44,161 167,780 62,286 43,152 28,067 34,275 46,839 17,094 15,660 4,197 9,887
2009 187,435 61,203 50,312 20,315 55,605 133,211 49,794 38,816 17,079 27,521 54,223 11,409 11,495 3,236 28,084
2010 221,456 70,821 69,113 31,725 49,797 162,503 56,993 54,910 14,623 35,977 58,953 13,828 14,203 17,102 13,820
1 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
2 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

177
Data Section 5
 Data Section 5

178
TABLE 51
Lifestyle and Target Date Mutual Funds:1 Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes
Total net assets Net new cash flow 2 Number of funds Number of share classes
Millions of dollars, year-end Millions of dollars, annual Year-end Year-end
Target Target Target Target
Year Total Lifestyle date Total Lifestyle date Total Lifestyle date Total Lifestyle date
1995 $2,746 $2,259 $487 $1,194 $1,009 $185 26 20 6 50 40 10
1996 6,497 5,693 805 2,583 2,367 216 44 35 9 70 61 9
1997 14,314 12,906 1,408 4,138 3,945 193 77 65 12 141 124 17
1998 25,413 20,905 4,508 6,015 4,862 1,153 110 93 17 199 176 23
1999 34,849 27,835 7,014 4,928 3,618 1,311 130 111 19 240 210 30
2000 39,716 30,928 8,788 7,581 3,983 3,598 146 122 24 279 237 42
2001 45,467 33,095 12,372 7,696 3,902 3,795 147 122 25 351 269 82
2002 49,425 34,523 14,902 8,095 4,386 3,708 171 146 25 432 350 82
2003 81,733 55,832 25,901 19,040 11,819 7,221 192 147 45 499 379 120
2004 129,170 85,414 43,756 28,336 15,432 12,903 241 157 84 740 477 263
2005 202,017 130,794 71,223 57,166 34,910 22,256 324 197 127 1,128 663 465
2006 303,594 189,034 114,560 66,791 33,769 33,022 422 238 184 1,558 775 783
2007 420,863 237,958 182,905 91,920 35,720 56,200 494 249 245 1,840 805 1,035
2008 335,428 175,591 159,837 54,424 12,527 41,897 617 275 342 2,222 851 1,371
2009 486,553 230,950 255,603 52,118 8,674 43,444 647 264 383 2,357 840 1,517
2010 603,950 264,155 339,795 48,587 4,184 44,403 642 261 381 2,331 836 1,495
1 Categories include data for funds that invest primarily in other funds.
2 Netnew cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 52
Lifestyle and Target Date Mutual Funds:1 Components of Net New Cash Flow2
Millions of dollars, annual
Sales Redemptions
New 3 Exchange 4 Regular 5 Exchange 6
Target Target Target Target
Year Total Lifestyle date Total Lifestyle date Total Lifestyle date Total Lifestyle date
1995 $1,289 $1,008 $282 $364 $355 $9 $304 $203 $100 $155 $151 $5
1996 3,393 2,771 622 564 552 12 989 583 406 385 373 11
1997 5,580 5,067 513 1,066 1,033 33 1,763 1,432 331 746 723 22
1998 8,856 7,549 1,306 2,782 1,428 1,354 3,557 2,916 641 2,066 1,199 867
1999 10,663 8,832 1,831 3,144 1,436 1,707 6,102 5,102 1,000 2,776 1,549 1,227

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

2000 15,034 10,767 4,267 4,621 1,776 2,845 8,302 6,648 1,654 3,772 1,912 1,861
2001 15,408 10,621 4,787 4,179 1,602 2,576 8,510 6,665 1,844 3,381 1,656 1,724
2002 18,235 12,953 5,282 3,691 1,384 2,307 10,901 8,561 2,340 2,930 1,389 1,541
2003 27,581 19,498 8,083 5,321 1,931 3,390 11,038 8,518 2,521 2,824 1,093 1,731
2004 41,670 25,228 16,442 8,713 3,239 5,474 17,571 11,296 6,274 4,477 1,738 2,739
2005 77,111 50,358 26,754 11,647 3,955 7,692 25,919 17,287 8,633 5,673 2,116 3,558
2006 89,496 49,584 39,912 17,113 5,956 11,157 31,232 18,571 12,662 8,586 3,201 5,385
2007 137,672 61,517 76,155 23,456 6,415 17,041 56,637 28,131 28,507 12,570 4,080 8,490
2008 127,518 48,978 78,539 22,099 5,979 16,120 73,879 35,492 38,387 21,314 6,938 14,375
2009 118,475 38,138 80,337 15,172 3,618 11,554 68,200 28,805 39,395 13,329 4,277 9,053
2010 149,988 42,356 107,632 20,606 3,983 16,623 104,982 37,567 67,415 17,025 4,588 12,437
1 Categories include data for funds that invest primarily in other funds.
2 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
3 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
4 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
5 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
6 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Components may not add to the total because of rounding.

179
Data Section 5
 TABLE 53
Retirement Mutual Funds:1 Total Net Assets, Net New Cash Flow, Number of Funds,
and Number of Share Classes
Money Money
Total Equity Hybrid Bond market Total Equity Hybrid Bond market
Total net assets Net new cash flow 2
Year Millions of dollars, year-end Millions of dollars, annual
1993 $4,900 $529 $487 $304 $3,580 $470 $197 -$5 $51 $226
1994 4,929 421 628 234 3,646 -132 40 29 -59 -142
1995 9,092 1,408 1,907 428 5,349 2,055 394 140 35 1,485
1996 9,574 1,420 2,003 446 5,705 610 612 -135 23 110
1997 10,960 2,066 2,284 518 6,092 505 430 -56 43 89
1998 13,273 2,564 2,578 709 7,423 1,197 285 -267 159 1,019
1999 18,113 6,859 2,304 860 8,090 138 57 -482 161 402
2000 18,762 6,961 1,764 1,034 9,004 917 844 -451 73 451
2001 25,303 6,646 1,487 1,348 15,823 542 -256 -160 221 737
2002 26,491 7,316 1,674 1,418 16,083 1,944 1,489 283 124 48
2003 40,074 21,536 3,748 2,359 12,431 8,385 9,686 1,610 820 -3,731
2004 66,421 47,856 8,104 2,822 7,640 18,637 19,300 3,193 324 -4,180
2005 101,133 78,680 11,747 3,780 6,926 25,053 21,848 3,145 908 -848
2006 154,252 124,148 16,556 5,340 8,207 33,430 28,241 3,147 1,197 845
2007 221,421 175,699 26,078 8,363 11,282 46,391 34,691 6,964 2,141 2,595
2008 181,160 130,837 25,201 9,417 15,704 46,413 32,855 8,094 2,090 3,373
2009 281,649 211,604 39,493 13,399 17,153 36,806 28,922 6,891 2,459 -1,466
2010 359,190 273,490 52,695 16,132 16,873 40,288 30,247 7,587 2,202 252
Number of funds Number of share classes
Year-end Year-end
1993 28 10 5 7 6 28 10 5 7 6
1994 44 17 7 12 8 44 17 7 12 8
1995 52 21 10 13 8 52 21 10 13 8
1996 53 23 10 12 8 53 23 10 12 8
1997 57 25 11 13 8 57 25 11 13 8
1998 63 30 16 10 7 63 30 16 10 7
Data Section 5

1999 79 45 16 12 6 79 45 16 12 6
2000 127 85 18 17 7 160 111 18 23 8
2001 184 123 27 24 10 237 150 46 30 11
2002 281 188 34 44 15 422 267 61 70 24
2003 461 316 55 73 17 641 422 88 105 26
2004 703 462 110 111 20 944 602 161 149 32
2005 826 523 157 125 21 1,302 787 274 203 38
2006 966 592 217 134 23 1,679 944 470 225 40
2007 1,147 679 284 158 26 1,967 1,062 605 255 45
2008 1,328 759 368 176 25 2,196 1,152 728 272 44
2009 1,380 750 421 185 24 2,321 1,199 775 306 41
2010 1,414 770 410 211 23 2,401 1,245 765 351 40
1 Retirement mutual funds include share classes and funds that are primarily available to retirement plans or IRAs. The table includes
data for funds that invest primarily in other funds.
2 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.

Note: Components may not add to the total because of rounding.

180 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 54
Retirement Mutual Funds:1 Components of Net New Cash Flow2
Millions of dollars, annual
Sales Redemptions
New 3 Exchange 4 Regular 5 Exchange 6
Money Money Money Money
Year Equity Hybrid Bond market Equity Hybrid Bond market Equity Hybrid Bond market Equity Hybrid Bond market
1993 $242 $14 $90 $13,907 $188 $1 $60 (*) $67 $17 $55 $13,681 $165 $3 $44 (*)
1994 94 91 60 14,760 204 5 26 $2 61 59 65 14,903 197 9 79 $1
1995 1,342 411 128 17,250 207 14 26 11 923 250 93 15,766 232 36 26 10
1996 1,325 440 141 18,998 196 24 27 20 752 501 101 18,887 157 98 44 22
1997 864 442 186 21,575 169 36 38 11 441 475 136 21,470 162 59 45 27

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

1998 1,073 463 333 23,867 254 23 56 36 789 670 183 22,867 253 83 47 17
1999 1,189 445 464 29,494 161 15 45 22 1,184 857 307 29,085 109 86 41 30
2000 2,269 364 452 31,729 194 10 25 44 1,533 746 353 31,279 87 80 51 42
2001 1,392 337 642 40,007 348 20 83 229 1,712 498 441 39,492 284 20 63 8
2002 3,203 737 858 59,587 583 63 228 61 2,079 488 925 59,549 218 29 37 51
2003 10,548 2,146 1,748 58,887 2,333 162 137 163 2,964 651 946 62,488 231 47 119 293
2004 24,947 4,244 1,781 39,237 1,274 136 107 177 6,581 1,108 1,437 43,156 341 79 126 438
2005 34,373 5,028 2,092 41,290 1,611 173 170 193 13,488 1,911 1,173 41,876 648 145 181 456
2006 49,855 6,517 2,305 45,463 3,721 426 253 322 24,171 3,509 1,168 44,426 1,165 287 193 514
2007 76,315 13,326 4,481 33,373 4,159 489 530 808 43,689 6,497 2,511 30,640 2,094 355 359 945
2008 76,362 15,672 5,327 44,770 5,304 1,466 730 1,336 43,523 7,865 3,437 41,809 5,288 1,178 529 924
2009 68,624 13,769 7,874 41,075 18,384 2,672 1,471 914 39,229 6,628 4,826 42,422 18,858 2,922 2,060 1,032
2010 85,857 18,090 7,527 72,488 15,069 1,467 709 657 56,090 10,583 5,169 72,277 14,589 1,387 866 616
1 Retirement mutual funds include share classes and funds that are primarily available to retirement plans or IRAs. The table includes data for funds that invest primarily in other funds.
2 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
3 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
4 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund family.
5 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
6 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

(*) = less than $500,000

Note: Components may not add to the total because of rounding.

181
Data Section 5
 Data Section 5

182
TABLE 55
Variable Annuity Mutual Funds: Total Net Assets, Net New Cash Flow, and Number of Funds
Total net assets Net new cash flow* Number of funds
Millions of dollars, year-end Millions of dollars, annual Year-end
Hybrid Money Hybrid Money Hybrid Money
Year Total Equity and bond market Total Equity and bond market Total Equity and bond market
1990 $28,749 $14,974 $8,355 $5,420 $3,083 $1,866 $323 $895 331 145 134 52
1991 91,056 69,138 13,734 8,184 6,174 5,097 1,498 -420 354 150 147 57
1992 109,868 80,934 21,046 7,888 12,884 8,708 4,363 -188 366 157 151 58
1993 152,403 104,823 39,740 7,841 26,088 16,423 9,834 -169 428 192 176 60
1994 176,370 121,153 44,339 10,878 22,066 15,998 3,763 2,305 507 245 202 60
1995 259,813 187,702 60,042 12,069 20,824 18,604 2,214 5 665 344 250 71
1996 349,341 260,959 73,189 15,193 40,133 32,699 5,063 2,371 800 435 290 75
1997 473,331 364,286 92,571 16,474 40,470 33,743 6,316 411 937 535 323 79
1998 615,152 474,961 116,337 23,853 44,259 27,857 10,362 6,040 1,162 703 377 82
1999 818,958 656,874 128,352 33,732 38,543 30,736 -461 8,267 1,353 867 405 81
2000 816,800 658,176 125,587 33,037 48,461 56,420 -5,896 -2,063 1,562 1,054 428 80
2001 742,258 564,622 132,881 44,756 21,583 3,452 9,444 8,687 1,750 1,255 406 89
2002 638,949 440,533 150,346 48,070 -1,286 -13,705 12,092 327 1,903 1,393 418 92
2003 837,443 620,662 181,130 35,652 29,827 34,428 7,471 -12,071 1,889 1,369 432 88
2004 973,910 739,983 200,567 33,361 33,505 33,021 3,167 -2,683 1,881 1,354 440 87
2005 1,072,894 823,049 216,146 33,699 16,404 12,679 5,024 -1,299 1,882 1,360 439 83
2006 1,266,934 976,184 248,558 42,192 29,712 17,198 7,013 5,501 1,926 1,396 449 81
2007 1,399,513 1,056,472 290,318 52,723 31,957 2,559 22,148 7,250 1,895 1,376 441 78
2008 929,512 603,784 250,757 74,971 -6,139 -28,029 2,352 19,538 1,892 1,377 436 79
2009 1,195,034 796,699 341,039 57,296 10,945 -9,929 39,679 -18,806 1,856 1,336 447 73
2010 1,348,276 892,773 406,949 48,554 -2,026 -24,247 31,932 -9,711 1,805 1,290 445 70
* Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

2011 INVESTMENT COMPANY FACT BOOK

 TABLE 56
Variable Annuity Mutual Funds: Components of Net New Cash Flow 1
Millions of dollars, annual
Sales Redemptions
New 2 Exchange 3 Regular4 Exchange 5
Hybrid Money Hybrid Money Hybrid Money Hybrid Money
Year Total Equity and bond market Total Equity and bond market Total Equity and bond market Total Equity and bond market
1990 $9,994 $4,714 $1,808 $3,473 $1,082 $450 $183 $449 $6,993 $2,941 $1,465 $2,587 $1,000 $357 $203 $440
1991 16,408 9,034 3,368 4,006 838 331 174 333 10,294 3,967 1,920 4,407 778 301 124 352
1992 24,779 13,294 6,634 4,851 1,568 740 350 478 12,014 4,745 2,348 4,921 1,450 581 273 596
1993 42,392 22,738 13,146 6,508 1,131 576 325 230 16,352 6,425 3,410 6,517 1,084 467 227 390
1994 48,010 25,661 10,907 11,443 7,017 4,064 429 2,525 25,933 9,941 6,830 9,161 7,029 3,786 742 2,501

ADDITIONAL CATEGORIES OF U.S. MUTUAL FUNDS

1995 53,101 31,661 9,326 12,114 8,674 4,984 727 2,963 32,283 13,201 7,234 11,849 8,668 4,840 606 3,223
1996 84,933 53,188 13,056 18,689 12,656 7,190 864 4,602 44,729 20,497 8,041 16,191 12,726 7,182 815 4,729
1997 105,222 67,005 15,290 22,926 24,210 13,017 2,348 8,846 65,377 33,408 9,905 22,063 23,586 12,871 1,417 9,298
1998 141,464 83,457 23,227 34,780 37,136 18,967 5,502 12,668 99,141 54,024 14,964 30,153 35,199 20,542 3,403 11,254
1999 212,025 130,900 22,005 59,120 40,818 22,080 2,985 15,753 174,418 100,392 22,276 51,750 39,883 21,853 3,174 14,856
2000 334,936 221,862 21,211 91,863 36,326 22,853 1,821 11,652 287,230 166,996 26,673 93,561 35,571 21,299 2,255 12,017
2001 346,166 196,698 34,840 114,628 31,716 16,184 4,928 10,604 325,676 191,318 27,169 107,189 30,623 18,112 3,155 9,356
2002 342,193 183,337 48,600 110,256 34,170 16,465 7,123 10,583 344,224 194,900 38,382 110,942 33,425 18,607 5,249 9,570
2003 283,007 168,816 54,619 59,572 28,791 15,457 5,794 7,540 253,526 136,424 46,269 70,832 28,445 13,421 6,673 8,351
2004 261,715 169,962 46,711 45,042 26,407 14,451 5,656 6,300 228,278 136,810 43,916 47,552 26,340 14,582 5,285 6,472
2005 246,396 162,156 48,451 35,789 19,598 10,601 3,402 5,595 230,118 148,412 44,127 37,578 19,472 11,666 2,702 5,104
2006 280,246 192,938 50,463 36,846 22,318 10,826 3,422 8,070 250,509 174,188 43,462 32,859 22,344 12,378 3,410 6,555
2007 343,673 219,650 72,689 51,334 37,045 19,701 8,247 9,097 317,211 216,347 55,375 45,488 31,550 20,444 3,413 7,693
2008 380,416 201,941 90,307 88,169 25,445 11,160 5,065 9,220 390,185 228,548 89,493 72,144 21,816 12,583 3,527 5,706
2009 314,975 154,729 98,718 61,528 22,650 6,875 11,480 4,294 303,902 157,151 68,521 78,231 22,778 14,382 1,999 6,397
2010 339,011 167,184 138,863 32,964 17,325 6,755 6,742 3,828 340,784 189,670 108,713 42,401 17,578 8,517 4,959 4,102
1 Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges.
2 New sales are the dollar value of new purchases of mutual fund shares. This does not include shares purchased through reinvestment of dividends in existing accounts.
3 Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group.
4 Regular redemptions are the dollar value of shareholder liquidation of mutual fund shares.
5 Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds in the same fund group.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

183
Data Section 5
 TABLE 57
Total Net Assets of Mutual Funds Held in Individual and Institutional Accounts
Millions of dollars, year-end
Money market
Year Total Equity funds Hybrid funds Bond funds funds
Total
2000 $6,964,634 $3,961,922 $346,276 $811,188 $1,845,248
2001 6,974,913 3,419,606 344,872 925,124 2,285,310
2002 6,383,477 2,664,007 323,947 1,130,448 2,265,075
2003 7,402,420 3,686,302 428,326 1,247,770 2,040,022
2004 8,095,082 4,386,666 516,603 1,290,477 1,901,336
2005 8,891,108 4,942,655 564,349 1,357,283 2,026,822
2006 10,397,935 5,914,100 650,314 1,495,069 2,338,451
2007 12,002,282 6,518,757 716,733 1,681,032 3,085,760
2008 9,603,604 3,705,548 498,284 1,567,536 3,832,236
2009 11,120,196 4,957,044 639,147 2,208,112 3,315,893
2010 11,820,677 5,667,400 741,068 2,608,287 2,803,922
Individual accounts
2000 $6,237,606 $3,749,687 $334,296 $741,692 $1,411,931
2001 6,098,684 3,239,488 331,983 843,414 1,683,799
2002 5,517,068 2,509,892 312,905 1,037,277 1,656,995
2003 6,529,580 3,473,839 414,027 1,147,865 1,493,848
2004 7,174,316 4,111,954 499,480 1,187,400 1,375,482
2005 7,774,598 4,605,373 545,468 1,222,769 1,400,987
2006 9,057,897 5,480,112 627,962 1,339,176 1,610,647
2007 10,327,955 6,040,802 692,158 1,494,546 2,100,449
2008 7,817,678 3,408,233 482,709 1,401,450 2,525,286
2009 9,262,344 4,526,140 619,586 1,981,616 2,135,002
2010p 9,995,832 5,150,129 716,691 2,314,935 1,814,076
Institutional accounts*
2000 $727,029 $212,235 $11,980 $69,496 $433,317
2001 876,229 180,119 12,889 81,710 601,511
2002 866,409 154,115 11,042 93,171 608,081
2003 872,840 212,463 14,299 99,904 546,174
2004 920,766 274,712 17,123 103,077 525,854
2005 1,116,510 337,281 18,881 134,514 625,834
2006 1,340,038 433,988 22,352 155,893 727,804
2007 1,674,327 477,955 24,575 186,486 985,311
2008 1,785,926 297,315 15,574 166,086 1,306,950
2009 1,857,852 430,904 19,560 226,497 1,180,891
2010p 1,824,845 517,271 24,377 293,351 989,846
Data Section 6

* Institutional accounts include accounts purchased by an institution, such as a business, financial, or nonprofit organization.
Institutional accounts do not include primary accounts of individuals issued by a broker-dealer.
p Data are preliminary.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

184 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 58
Total Net Assets of Institutional Investors in Mutual Funds by Type of Institution and
Type of Fund
Millions of dollars, year-end
Business Financial Nonprofit
Year Total corporations institutions 1 organizations Other 2
2002 Total $866,409 $414,108 $314,708 $86,734 $50,859
Equity 154,115 56,570 56,755 23,710 17,080
Hybrid 11,042 5,027 4,282 1,089 643
Bond 93,171 32,780 16,519 32,323 11,549
Money market 608,081 319,731 237,152 29,611 21,587
2003 Total 872,840 408,534 304,365 94,343 65,598
Equity 212,463 79,352 70,561 33,639 28,910
Hybrid 14,299 6,784 4,625 2,185 705
Bond 99,904 33,119 18,416 32,479 15,890
Money market 546,174 289,278 210,763 26,040 20,093
2004 Total 920,766 429,853 293,830 94,236 102,846
Equity 274,712 92,787 88,198 38,004 55,723
Hybrid 17,123 7,482 6,036 2,654 951
Bond 103,077 30,020 20,305 28,992 23,760
Money market 525,854 299,563 179,291 24,587 22,412
2005 Total 1,116,510 492,419 350,909 100,114 173,069
Equity 337,281 104,857 101,871 43,549 87,004
Hybrid 18,881 6,809 7,611 2,627 1,834
Bond 134,514 28,542 26,041 25,597 54,334
Money market 625,834 352,211 215,385 28,341 29,896
2006 Total 1,340,038 602,349 402,541 112,820 222,328
Equity 433,988 138,718 121,376 53,181 120,713
Hybrid 22,352 7,847 9,815 2,738 1,953
Bond 155,893 34,509 28,478 26,062 66,845
Money market 727,804 421,275 242,873 30,840 32,817
2007 Total 1,674,327 741,848 496,617 133,144 302,718
Equity 477,955 141,623 122,199 58,103 156,029
Hybrid 24,575 8,152 11,799 2,436 2,187
Bond 186,486 41,243 30,610 25,180 89,453
Money market 985,311 550,830 332,008 47,425 55,048
2008 Total 1,785,926 840,434 566,927 118,179 260,385
Equity 297,315 83,240 70,967 31,936 111,173
Hybrid 15,574 5,780 6,692 1,463 1,640
Bond 166,086 36,747 26,425 23,368 79,547
Money market 1,306,950 714,668 462,844 61,413 68,025
2009 Total 1,857,852 836,279 566,616 126,988 327,968
Data Section 6

Equity 430,904 122,373 98,391 43,670 166,470

Hybrid 19,560 7,316 8,244 1,792 2,208
Bond 226,497 60,492 36,479 30,067 99,459
Money market 1,180,891 646,098 423,502 51,460 59,831
2010p Total 1,824,845 740,441 544,477 133,306 406,620
Equity 517,271 139,226 120,982 48,578 208,485
Hybrid 24,377 8,661 9,836 2,081 3,799
Bond 293,351 75,059 51,784 32,329 134,180
Money market 989,846 517,495 361,875 50,319 60,157
1 Financial institutions include credit unions, investment clubs, accounts of banks not held as fiduciaries, insurance companies, and
other financial organizations.
2 Other institutional investors include state and local governments, funds holding mutual fund shares, and other institutional

accounts not classified.

p Data are preliminary.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

INSTITUTIONAL INVESTORS IN THE U.S. MUTUAL FUND INDUSTRY 185

 TABLE 59
Total Net Assets of Institutional Investors in Taxable Money Market Funds by
Type of Institution and Type of Fund 1
Millions of dollars, year-end
Business Financial Nonprofit
Year Total corporations institutions 2 organizations Other 3
2000 Total $409,477 $201,996 $158,334 $22,987 $26,160
Institutional funds 305,180 137,226 134,543 14,951 18,460
Retail funds 104,297 64,770 23,791 8,037 7,699
2001 Total 575,202 300,491 219,136 27,975 27,599
Institutional funds 469,332 235,735 195,688 18,212 19,698
Retail funds 105,870 64,757 23,448 9,764 7,902
2002 Total 578,129 303,165 226,645 27,673 20,646
Institutional funds 485,717 247,775 202,489 20,205 15,248
Retail funds 92,412 55,390 24,156 7,468 5,398
2003 Total 509,444 266,890 198,158 24,873 19,523
Institutional funds 426,835 217,867 176,770 18,535 13,663
Retail funds 82,609 49,023 21,389 6,339 5,859
2004 Total 480,301 271,792 165,395 22,936 20,178
Institutional funds 404,084 223,647 149,570 16,274 14,593
Retail funds 76,217 48,146 15,825 6,662 5,585
2005 Total 569,730 317,580 198,300 26,146 27,704
Institutional funds 479,977 266,053 173,229 20,393 20,302
Retail funds 89,753 51,527 25,071 5,753 7,401
2006 Total 667,533 383,030 224,721 29,134 30,648
Institutional funds 575,482 318,958 210,539 21,925 24,060
Retail funds 92,051 64,072 14,182 7,209 6,588
2007 Total 909,719 501,673 311,080 44,878 52,089
Institutional funds 802,379 430,233 289,954 36,668 45,525
Retail funds 107,339 71,440 21,125 8,210 6,564
2008 Total 1,238,258 671,540 441,820 59,770 65,128
Institutional funds 1,123,636 594,591 417,579 51,754 59,712
Retail funds 114,623 76,950 24,241 8,016 5,416
2009 Total 1,119,079 604,351 407,882 49,884 56,963
Institutional funds 1,028,286 541,198 390,271 44,024 52,794
Retail funds 90,793 63,153 17,611 5,860 4,169
2010p Total 941,277 485,487 348,829 49,218 57,743
Institutional funds 865,554 432,953 334,022 44,325 54,255
Retail funds 75,722 52,535 14,807 4,893 3,488
1 Institutional funds are sold primarily to institutional investors or institutional accounts. This includes accounts that are purchased
by an institution, such as a business, financial, or nonprofit organization. Retail funds are sold primarily to individual investors and
include variable annuity mutual funds.
Data Section 6

2 Financial institutions include credit unions, investment clubs, accounts of banks not held as fiduciaries, insurance companies, and

other financial organizations.

3 Other institutional investors include state and local governments, funds holding mutual fund shares, and other institutional

accounts not classified.

p Data are preliminary.

Note: Data for funds that invest primarily in other mutual funds were excluded from the series.
Components may not add to the total because of rounding.

186 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 60
Worldwide Total Net Assets of Mutual Funds*
Millions of U.S. dollars, year-end
2004 2005 2006 2007 2008 2009 2010
World $16,152,911 $17,757,360 $21,808,884 $26,132,316 $18,920,012 $22,952,849 $24,698,642
Americas 8,780,593 9,750,205 11,470,489 13,423,909 10,581,943 12,585,819 13,586,869
Argentina 2,355 3,626 6,153 6,789 3,867 4,470 5,179
Brazil 220,586 302,927 418,771 615,365 479,321 783,970 980,448
Canada 413,772 490,518 566,298 698,397 416,031 565,156 636,947
Chile 12,588 13,969 17,700 24,444 17,587 34,227 38,243
Costa Rica 1,053 804 1,018 1,203 1,098 1,309 1,470
Mexico 35,157 47,253 62,614 75,428 60,435 70,659 98,094
Trinidad and Tobago N/A N/A N/A N/A N/A 5,832 5,812
United States 8,095,082 8,891,108 10,397,935 12,002,283 9,603,604 11,120,196 11,820,677
Europe 5,640,425 6,002,310 7,803,877 8,934,860 6,231,116 7,545,535 7,902,835
Austria 103,709 109,002 128,236 138,709 93,269 99,628 94,670
Belgium 118,373 115,314 137,291 149,842 105,057 106,721 96,288
Bulgaria N/A N/A N/A N/A 226 256 302
Czech Republic 4,859 5,334 6,488 7,595 5,260 5,436 5,508
Denmark 64,796 75,187 95,601 104,083 65,182 83,024 89,800
Finland 37,658 45,415 67,804 81,136 48,750 66,131 71,210
France 1,370,954 1,362,671 1,769,258 1,989,690 1,591,082 1,805,641 1,617,176
Germany 295,997 296,787 340,325 372,072 237,986 317,543 333,713
Greece 43,106 32,011 27,604 29,807 12,189 12,434 8,627
Hungary 4,932 6,113 8,472 12,573 9,188 11,052 11,532
Ireland 467,620 546,242 855,011 951,371 720,486 860,515 1,013,549
Italy 511,733 450,514 452,798 419,687 263,588 279,474 234,313
Liechtenstein 12,543 13,970 17,315 25,103 20,489 30,329 35,387
Luxembourg 1,396,131 1,635,785 2,188,278 2,685,065 1,860,763 2,293,973 2,512,874
Netherlands 102,134 94,357 108,560 113,759 77,379 95,512 85,924
Norway 29,911 40,111 54,075 74,709 41,157 71,170 84,505
Poland 12,015 17,651 28,959 45,542 17,782 23,025 25,595
Portugal 30,514 28,801 31,214 29,732 13,572 15,808 11,004
Romania 72 109 247 390 326 1,134 1,713
Russia 1,347 2,417 5,659 7,175 2,026 3,182 3,917
Slovakia 2,171 3,031 3,168 4,762 3,841 4,222 4,349
Slovenia N/A N/A 2,486 4,219 2,067 2,610 2,663
Spain 317,538 316,864 367,918 396,534 270,983 269,611 216,915
Sweden 107,064 119,103 176,968 194,955 113,331 170,277 205,449
Switzerland 94,405 116,669 159,517 176,282 135,052 168,260 261,893
Turkey 18,112 21,760 15,462 22,609 15,404 19,426 19,545
United Kingdom 492,731 547,092 755,163 897,460 504,681 729,141 854,413
Asia and Pacific 1,677,887 1,939,251 2,456,492 3,678,326 2,037,536 2,715,234 3,067,323
Australia 635,073 700,068 864,234 1,192,988 841,133 1,198,838 1,455,850
China N/A N/A N/A 434,063 276,303 381,207 364,985
Hong Kong 343,638 460,517 631,055 818,421 N/A N/A N/A
India 32,846 40,546 58,219 108,582 62,805 130,284 111,421
Japan 399,462 470,044 578,883 713,998 575,327 660,666 785,504
Korea, Rep. of 177,417 198,994 251,930 329,979 221,992 264,573 266,495
New Zealand 11,171 10,332 12,892 14,925 10,612 17,657 19,562
Pakistan N/A N/A 2,164 4,956 1,985 2,224 2,290
Philippines 952 1,449 1,544 2,090 1,263 1,488 2,184
Taiwan 77,328 57,301 55,571 58,323 46,116 58,297 59,032
Africa 54,006 65,594 78,026 95,221 69,417 106,261 141,615
Data Section 7

South Africa 54,006 65,594 78,026 95,221 69,417 106,261 141,615

* Funds of funds are not included except for France, Italy, and Luxembourg. Data include home-domiciled funds, except for Hong Kong,
Korea, and New Zealand, which include home- and foreign-domiciled funds.
N/A = not available
Note: Components may not add to the total because of rounding. For more worldwide mutual fund statistics, visit ICI’s website at
www.ici.org/research#statistics.
Sources: Investment Company Institute, European Fund and Asset Management Association, and other national mutual fund associations

WORLDWIDE MUTUAL FUND TOTALS 187

 TABLE 61
Worldwide Number of Mutual Funds*
Year-end
2004 2005 2006 2007 2008 2009 2010
World 55,523 56,867 61,855 66,348 69,032 67,552 69,519
Americas 14,063 13,763 14,475 15,460 16,459 16,954 18,019
Argentina 186 200 223 241 253 252 254
Brazil 2,859 2,685 2,907 3,381 4,169 4,744 5,618
Canada 1,915 1,695 1,764 2,038 2,015 2,075 2,117
Chile 537 683 926 1,260 1,484 1,691 1,912
Costa Rica 115 110 100 93 85 64 68
Mexico 411 416 437 420 431 407 434
Trinidad and Tobago N/A N/A N/A N/A N/A 36 35
United States 8,040 7,974 8,118 8,027 8,022 7,685 7,581
Europe 29,306 30,060 33,151 35,210 36,780 34,899 35,292
Austria 840 881 948 1,070 1,065 1,016 1,016
Belgium 1,281 1,391 1,549 1,655 1,828 1,845 1,797
Bulgaria N/A N/A N/A N/A 81 85 90
Czech Republic 53 51 52 66 76 78 80
Denmark 423 471 494 500 489 483 490
Finland 280 333 376 379 389 377 366
France 7,908 7,758 8,092 8,243 8,301 7,982 7,791
Germany 1,041 1,076 1,199 1,462 1,675 2,067 2,106
Greece 262 247 247 230 239 210 213
Hungary 97 91 161 212 270 264 276
Ireland 2,088 2,127 2,531 2,898 3,097 2,721 2,899
Italy 1,142 1,035 989 924 742 675 650
Liechtenstein 171 200 233 391 335 348 409
Luxembourg 6,855 7,222 7,919 8,782 9,351 9,017 9,353
Netherlands 542a 515 473 450 458a N/A N/A
Norway 406 419 524 511 530 487 507
Poland 130 150 157 188 210 208 214
Portugal 163 169 175 180 184 171 171
Romania 19 23 32 41 52 51 56
Russia 210 257 358 533 528 480 462
Slovakia 40 43 43 54 56 54 58
Slovenia N/A N/A 96 106 125 125 130
Spain 2,559 2,672 3,235 2,940 2,944 2,588 2,486
Sweden 461 464 474 477 508 506 504
Switzerland 385 510 609 567 572 509 653
Turkey 240 275 282 294 304 286 311
United Kingdom 1,710 1,680 1,903 2,057 2,371 2,266 2,204
Asia and Pacific 11,617 12,427 13,479 14,847 14,909 14,795 15,265
Australia N/A N/A N/A N/A N/A N/A N/A
China N/A N/A N/A 341 429 547 660
Hong Kong 1,013 1,009 1,099 1,162 N/A N/A N/A
India 394 445 468 555 551 590 658
Japan 2,552 2,640 2,753 2,997 3,333 3,656 3,905
Korea, Rep. of 6,636 7,279 8,030 8,609 9,384 8,703 8,687
New Zealand 553 563 613 623 643 702 700
Pakistan N/A N/A 31 64 83 96 125
Philippines 24 32 38 40 43 41 43
Taiwan 445 459 447 456 443 460 487
Africa 537 617 750 831 884 904 943
Data Section 7

South Africa 537 617 750 831 884 904 943

* Funds of funds are not included except for France, Italy, and Luxembourg. Data include home-domiciled funds, except for Hong Kong,
Korea, and New Zealand, which include home- and foreign-domiciled funds.
a Year-end data are not available. Data are as of September.

N/A = not available

Note: For more worldwide mutual fund statistics, visit ICI’s website at www.ici.org/research#statistics.
Sources: Investment Company Institute, European Fund and Asset Management Association, and other national mutual fund associations

188 2011 INVESTMENT COMPANY FACT BOOK

 TABLE 62
Worldwide Net Sales1 of Mutual Funds
Millions of U.S. dollars, annual
2004 2005 2006 2007 2008 2009 2010
World $458,515 $968,786 $1,296,992 $1,533,465 $275,672 $272,149 $57,296
Americas 167,343 424,357 725,054 1,204,158 606,159 80,084 -38,994
Argentina N/A N/A N/A N/A N/A N/A N/A
Brazil 1,611 5,293 21,083 16,880 -32,653 47,317 58,316
Canada 18,454 31,220 36,579 61,286 17,495 12,074 23,797
Chile 3,236 N/A 3,113 3,282 -1,167 9,921 416
Costa Rica N/A N/A N/A N/A N/A N/A 171
Mexico 768 6,849 11,377 10,154 -3,418 8,572 18,382
Trinidad and Tobago N/A N/A N/A N/A N/A -150 -45
United States 143,274 380,995 652,902 1,112,556 625,902 2,350 -140,031
Europe 236,618 459,913 427,527 101,766 -443,035 166,653 84,421
Austria 6,874 16,240 3,402 -4,864 -18,147 -4,746 -2,301
Belgium N/A N/A N/A N/A N/A N/A N/A
Bulgaria N/A N/A N/A N/A -151 8 51
Czech Republic -77 642 59 198 -1,561 -263 55
Denmark 9,260 12,950 5,646 1,893 -4,000 2,419 5,204
Finland 7,856 6,371 13,229 3,535 -11,387 5,475 936
France 66,216 76,442 133,843 -49,354 -68,351 6,164 -110,856
Germany -8,687 10,557 -10,472 -18,531 -32,746 11,935 13,835
Greece 52 -7,810 -9,598 -2,643 -11,382 -1,124 -1,424
Hungary N/A 1,777 -42 2,436 -1,755 776 936
Ireland N/A N/A N/A N/A N/A N/A N/A
Italy -37,142 -19,216 -59,828 -81,538 -107,691 -10,925 -29,921
Liechtenstein 2,569 1,363 782 3,636 2,317 5,087 261
Luxembourg 142,199 293,331 299,906 255,689 -102,257 95,059 152,608
Netherlands 802 -9,313 11 -5,732 -6,117a N/A 225
Norway 2,968 8,231 4,676 6,870 40 6,689 4,807
Poland N/A N/A N/A N/A -1,423 859 1,278
Portugal 534 1,645 -1,843 -5,707 -11,169 1,120 -3,684
Romania 29 20 97 93 125 760 561
Russia N/A N/A N/A N/A N/A N/A N/A
Slovakia 594 1,207 -512 689 -897 80 308
Slovenia N/A N/A 18 637 -433 27 21
Spain 30,610 26,962 -3,852 -23,273 -84,149 -15,858 -30,938
Sweden 5,400 7,518 7,735 2,228 3,754 10,203 7,371
Switzerland -2,185 9,218 11,681 15,074 17,851 7,343 4,063
Turkey N/A N/A N/A N/A N/A 2,324 2,608
United Kingdom 8,746 21,778 32,589 430 -3,506 43,241 68,417
Asia and Pacific 48,005 75,420 135,467 217,849 105,561 13,908 -3,093
Australia N/A N/A N/A N/A N/A N/A N/A
China N/A N/A N/A N/A 35,721b -35,612 -15,115
Hong Kong 2,640 1,195 3,613 6,834 N/A N/A N/A
India 339 4,915 11,766 27,357 2,754 43,029 -35,950
Japan 22,429 77,458 99,625 120,308 5,430 32,571 68,847
Korea, Rep. of 31,540 13,585 25,292 61,081 58,818 -27,836 -19,604
New Zealand -132 -555 -196 254 226 1,363 1,281
Pakistan N/A N/A 425 2,922 -612 -3 -208
Philippines 118 300 -241 -15 -453 11 318
Taiwan -8,929 -21,478 -4,817 -892 3,677 385 -2,661
Africa 6,549 9,096 8,944 9,692 6,987 11,504 14,962
Data Section 7

South Africa 6,549 9,096 8,944 9,692 6,987 11,504 14,962

1 Net sales is a calculation of total sales minus total redemptions plus net exchanges.
2 Funds of funds are not included except for France, Italy, and Luxembourg. Data include home-domiciled funds, except for Hong Kong,
Korea, and New Zealand, which include home- and foreign-domiciled funds.
a Year-end data are not available. Data are for January through September.
b Data are only for October through December.

N/A = not available

Note: Components may not add to the total because of rounding.
Sources: Investment Company Institute, European Fund and Asset Management Association, and other national mutual fund associations

WORLDWIDE MUTUAL FUND TOTALS 189

Appendix A
How U.S.-Registered Investment Companies Operate
and the Core Principles Underlying Their Regulation

This appendix provides an overview of how investment company operations and features serve investors,
examines the tax treatment of funds, and describes the core principles underlying investment company
regulation.

The Origins of Pooled Investing........................................................................................................................... 190

The Different Types of U.S. Investment Companies.......................................................................................... 192
The Organization of a Mutual Fund..................................................................................................................... 192
Tax Features of Mutual Funds............................................................................................................................... 196
Core Principles Underlying the Regulation of U.S. Investment Companies....................................................202

The Origins of Pooled Investing

The investment company concept dates to the late 1700s in Europe, according to K. Geert
Rouwenhorst in The Origins of Mutual Funds, when “a Dutch merchant and broker…invited
subscriptions from investors to form a trust…to provide an opportunity to diversify for small
investors with limited means.”

The emergence of “investment pooling” in England in the 1800s brought the concept closer to
U.S. shores. In 1868, the Foreign and Colonial Government Trust formed in London. This trust
resembled the U.S. fund model in basic structure, providing “the investor of moderate means the
same advantages as the large capitalists…by spreading the investment over a number of different
stocks.”

Perhaps more importantly, the British fund model established a direct link with U.S. securities
markets, helping finance the development of the post–Civil War U.S. economy. The Scottish
American Investment Trust, formed on February 1, 1873, by fund pioneer Robert Fleming, invested
in the economic potential of the United States, chiefly through American railroad bonds. Many other
trusts followed that not only targeted investment in America, but also led to the introduction of the
fund investing concept on U.S. shores in the late 1800s and early 1900s.

190 APPENDIX A
The first mutual, or “open-end,” fund was introduced in Boston in March 1924. The Massachusetts
Investors Trust, formed as a common law trust, introduced important innovations to the investment
company concept by establishing a simplified capital structure, continuous offering of shares,
the ability to redeem shares rather than hold them until dissolution of the fund, and a set of clear
investment restrictions and policies.

The stock market crash of 1929 and the Great Depression that followed greatly hampered the
growth of pooled investments until a succession of landmark securities laws, beginning with the
Securities Act of 1933 and concluding with the Investment Company Act of 1940, reinvigorated
investor confidence. Renewed investor confidence and many innovations led to relatively steady
growth in industry assets and number of accounts.

Four Principal Securities Laws Govern Investment Companies

The Investment Company Act of 1940 Regulates the structure and operations of investment
companies through a combination of disclosure requirements
and restrictions on day-to-day operations. Among other things,
the Investment Company Act addresses investment company
capital structures, custody of assets, investment activities
(particularly with respect to transactions with affiliates and
other transactions involving potential conflicts of interest),
and the duties of fund boards.

The Investment Advisers Act of 1940 Regulates investment advisers. Requires all advisers to
registered investment companies and other large advisers
to register with the SEC. The Advisers Act contains provisions
requiring fund advisers to meet recordkeeping, custodial,
reporting, and other regulatory responsibilities.

The Securities Exchange Act of 1934 Regulates the trading, purchase, and sale of securities, including
investment company shares. The 1934 Act also regulates
broker-dealers, including investment company principal
underwriters and others that sell investment company shares,
and requires them to register with the SEC.

The Securities Act of 1933 Regulates public offerings of securities, including investment
company shares. The 1933 Act also requires that all investors
receive a current prospectus describing the fund.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 191
The Different Types of U.S. Investment Companies
Fund sponsors in the U.S. offer four types of registered investment companies: open-end
investment companies (commonly called mutual funds), closed-end investment companies,
exchange-traded funds (ETFs), and unit investment trusts (UITs).

The vast majority of investment companies are mutual funds, both in terms of number of funds
and assets under management. Mutual funds can have actively managed portfolios, in which
a professional investment adviser creates a unique mix of investments to meet a particular
investment objective, or passively managed portfolios, in which the adviser seeks to track the
performance of a selected benchmark or index. One hallmark of mutual funds is that they issue
redeemable securities, meaning that the fund stands ready to buy back its shares at their current
net asset value (NAV). The NAV is calculated by dividing the total market value of the fund’s assets,
minus its liabilities, by the number of mutual fund shares outstanding.

Unlike mutual funds, closed-end funds do not issue redeemable shares. Instead, they issue a fixed
number of shares that trade intraday on stock exchanges at market-determined prices. Investors
in a closed-end fund buy or sell shares through a broker, just as they would trade the shares of any
publicly traded company. For more information on closed-end funds, see chapter 4 on page 53.

ETFs are described as a hybrid of other types of investment companies. They are structured and
legally classified as mutual funds or UITs (discussed below), but trade intraday on stock exchanges
like closed-end funds. ETFs only buy and sell fund shares directly to authorized participants in large
blocks, often 50,000 shares or more. For more information on ETFs, see chapter 3 on page 39.

UITs are also a hybrid, with some characteristics of mutual funds and some of closed-end funds.
Like closed-end funds, UITs typically issue only a specific, fixed number of shares, called “units.”
Like mutual funds, the units are redeemable, but unlike mutual funds, generally the UIT sponsor
will maintain a secondary market in the units so that redemptions do not deplete the UIT’s assets.
A UIT does not actively trade its investment portfolio, instead buying and holding a set of particular
investments until a set termination date, at which time the trust is dissolved and proceeds are paid
to shareholders.

The Organization of a Mutual Fund

Individuals and institutions invest in a mutual fund by purchasing shares issued by the fund. It is
through these sales of shares that a mutual fund raises the cash used to invest in its portfolio of
stocks, bonds, and other investments. Each investor shares in the returns from the fund’s portfolio
while benefiting from professional investment management, diversification, and liquidity. Mutual
funds may offer other benefits and services, such as asset allocation programs or check-writing
privileges on money market fund accounts.

192 APPENDIX A
A mutual fund is organized under state law either as a corporation or a business trust (sometimes
called a statutory trust). Mutual funds have officers and directors (if the fund is a corporation)
or trustees (if the fund is a business trust).1 In this way, mutual funds are like any other type of
operating company, such as Exxon or Google. The fund’s board plays an important role, described
in more detail below, in overseeing fund operations.

Unlike other companies, however, a mutual fund is typically externally managed; it is not an
operating company and it has no employees in the traditional sense. Instead, a fund relies upon
third parties or service providers that are either affiliated organizations or independent contractors
to invest fund assets and carry out other business activities. The diagram below (Figure A.1) shows
the primary types of service providers usually relied upon by a fund.

Although it typically has no employees, a fund is required by law to have its own written
compliance program, overseen by an individual designated as a chief compliance officer (CCO).
This compliance program establishes detailed procedures and internal controls designed to ensure
compliance with all relevant laws and regulations.

FIGURE A.1
Organization of a Mutual Fund

Shareholders

Sponsor/
Investment Administrator
adviser

Independent Board of directors Principal

public underwriter
accountant Fund

Custodian Transfer agent

1 For ease of reference, this appendix refers to all directors and trustees as directors and all boards as boards of directors.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 193
Shareholders
Like shareholders of other companies, mutual fund shareholders have specific voting rights. These
include the right to elect directors at meetings called for that purpose and the right to approve
material changes in the terms of a fund’s contract with its investment adviser, the entity that
manages the fund’s assets. For example, a fund’s management fee cannot be increased or a fund’s
investment objectives or fundamental policies cannot be changed unless a majority of shareholders
vote to approve the increase or change.

Sponsors
Setting up a mutual fund is a complicated process performed by the fund’s sponsor, which is
typically the fund’s investment adviser. The fund sponsor has a variety of responsibilities. For
example, it must assemble the group of third parties needed to launch the fund, including
the persons or entities charged with managing and operating the fund. The sponsor provides
officers and affiliated directors to oversee the fund and recruits unaffiliated persons to serve as
independent directors.

Some of the major steps in the process of starting a mutual fund include organizing the fund
under state law as either a business trust or corporation, registering the fund with the SEC as an
investment company pursuant to the Investment Company Act of 1940, and registering the fund
shares for sale to the public pursuant to the Securities Act of 1933. 2 Unless otherwise exempt from
doing so, the fund must also make filings and pay fees to each state (except Florida) in which the
fund’s shares will be offered to the public. The Investment Company Act also requires that each
new fund have at least $100,000 of seed capital before distributing its shares to the public; this
capital is usually contributed by the sponsor or adviser in the form of an initial investment.

Advisers
Investment advisers have overall responsibility for directing the fund’s investments and handling
its business affairs. The investment advisers have their own employees, including investment
professionals who work on behalf of the funds’ shareholders and determine which securities to
buy and sell in the funds’ portfolio, consistent with the funds’ investment objectives and policies.
In addition to managing the fund’s portfolio, the adviser often serves as administrator to the fund,
providing various “back office” services. As noted earlier, a fund’s investment adviser is often the
fund’s initial sponsor and its initial shareholder through the seed money invested to create the
fund.

2 For more information on the requirements for the initial registration of a mutual fund, see the SEC’s Investment Company Registration
and Regulation Package, available at www.sec.gov/divisions/investment/invcoreg121504.htm.

194 APPENDIX A
To protect investors, a fund’s investment adviser and the adviser’s employees are subject to
numerous standards and legal restrictions, including restrictions on transactions that may pose
conflicts of interest. Like the mutual fund, investment advisers are required to have their own
written compliance programs that are overseen by chief compliance officers and establish detailed
procedures and internal controls designed to ensure compliance with all relevant laws and
regulations.

Administrators
A fund’s administrator handles the many back office functions for a fund. For example,
administrators often provide office space, clerical and fund accounting services, data processing,
bookkeeping and internal auditing, and prepare and file SEC, tax, shareholder, and other reports.
Fund administrators also help maintain compliance procedures and internal controls, subject to
oversight by the fund’s board and CCO.

Principal Underwriters
Investors buy and redeem fund shares either directly or indirectly through the principal
underwriter, also known as the fund’s distributor. Principal underwriters are registered under
the Securities Exchange Act of 1934 as broker-dealers, and, as such, are subject to strict rules
governing how they offer and sell securities to investors.

The principal underwriter contracts with the fund to purchase and then resell fund shares to the
public. A majority of both the fund’s independent directors and the entire fund board must approve
the contract with the principal underwriter.

Transfer Agents
Mutual funds and their shareholders rely on the services of transfer agents to maintain records of
shareholder accounts, calculate and distribute dividends and capital gains, and prepare and mail
shareholder account statements, federal income tax information, and other shareholder notices.
Some transfer agents also prepare and mail statements confirming shareholder transactions and
account balances, and maintain customer service departments, including call centers, to respond
to shareholder inquiries.

Auditors
Auditors certify the fund’s financial statements. The auditors’ oversight role is described more
fully below.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 195
Tax Features of Mutual Funds
Mutual funds are subject to special tax rules set forth in subchapter M of the Internal Revenue
Code. Unlike most corporations, mutual funds are not subject to taxation on their income or capital
gains at the entity level, provided that they meet certain gross income, asset, and distribution
requirements.

To qualify as a regulated investment company (RIC), under subchapter M, at least 90 percent of

a mutual fund’s gross income must be derived from certain sources, including dividends, interest,
payments with respect to securities loans, and gains from the sale or other disposition of stock,
securities, or foreign currencies. In addition, at the close of each quarter of the fund’s taxable year,
at least 50 percent of the value of the fund’s total net assets must consist of cash, cash items,
government securities, securities of other funds, and investments in other securities which, with
respect to any one issuer, represent neither more than 5 percent of the assets of the fund nor more
than 10 percent of the voting securities of the issuer. Further, no more than 25 percent of the fund’s
assets may be invested in the securities of any one issuer (other than government securities or the
securities of other funds), the securities (other than the securities of other funds) of two or more
issuers which the fund controls and are engaged in similar trades or businesses, or the securities
of one or more qualified publicly traded partnerships.

If a mutual fund satisfies the gross income and asset tests and thus qualifies as a RIC, the fund
is not subject to tax on its income and capital gains, provided that the RIC distributes at least
90 percent of its income (other than net capital gains) each year. A RIC may retain up to 10 percent
of its income and all capital gains, but the retained income is taxed at regular corporate tax rates.
Therefore, mutual funds generally distribute substantially all of their income and capital gains
each year.

196 APPENDIX A
 Mutual Fund Assets by Tax Status
Mutual funds generally distribute all earnings—capital gains and ordinary dividends—each
year to shareholders, and are taxed only on amounts retained. Fund investors are ultimately
responsible for paying tax on a fund’s earnings, whether they receive the distributions in
cash or reinvest them in additional fund shares. Investors often attempt to lessen the impact
of taxes on their investments by investing in tax-exempt funds and tax-deferred retirement
accounts and variable annuities. As of year-end 2010, 7 percent of all mutual fund assets
were held in tax-exempt funds, and 48 percent were invested in tax-deferred accounts held
by households (Figure A.2).

For more information on tax issues affecting mutual fund shareholders, visit the Institute’s
website at www.ici.org.

FIGURE A.2
55 Percent of Mutual Fund Assets Were Held in Tax-Deferred Accounts and
Tax-Exempt Funds
Percent, year-end 2010

33%
Taxable household

48%
Tax-deferred household

12%
Taxable nonhousehold
7%
Tax-exempt funds
Total mutual fund assets: $11.8 trillion

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 197
The Internal Revenue Code also imposes an excise tax on RICs, unless a RIC distributes by
December 31 at least 98 percent of its ordinary income earned during the calendar year, and
98 percent of its net capital gain earned during the 12-month period ending on October 31 of
the calendar year. Mutual funds typically seek to avoid this charge—imposed at a 4 percent rate
on the “underdistributed” amount—by electing to distribute their income each year.

Types of Distributions
Mutual funds make two types of taxable distributions to shareholders: ordinary dividends and
capital gains.

Dividend distributions come primarily from the interest and dividends earned by the securities
in a fund’s portfolio and net short-term gains, if any, after expenses are paid by the fund. These
distributions must be reported as dividends on an investor’s tax return and are taxed at the
investor’s ordinary income tax rate. Legislation in effect through 2012 provides a top tax rate of
15 percent on certain “qualified dividend” income. Some dividends paid by mutual funds may
qualify for this lower tax rate.

Long-term capital gains distributions represent a fund’s net gains, if any, from the sale of securities
held in its portfolio for more than one year. Legislation in effect through 2012 also provides a top
tax rate of 15 percent on investors’ long-term capital gains; a lower rate applies to some taxpayers.

Fund investors ultimately are responsible for paying tax on their share of a fund’s earnings, whether
they receive the distributions in cash or reinvest them in additional fund shares. To help mutual
fund shareholders understand the impact of taxes on the returns generated by their investments,
the SEC requires mutual funds to disclose standardized after-tax returns for one-, five-, and
10-year periods. After-tax returns, which accompany before-tax returns in fund prospectuses,
are presented in two ways:

»» After taxes on fund distributions only (preliquidation)

»» After taxes on fund distributions and an assumed redemption of fund shares (postliquidation)

198 APPENDIX A
 Mutual Fund Dividend Distributions
Dividend distributions represent income—primarily from interest and dividends earned by
securities in a fund’s portfolio—after expenses are paid by the fund. Mutual funds distributed
$188 billion in dividends to fund shareholders in 2010 (Figure A.3). Bond and money market
funds accounted for 55 percent of all dividend distributions in 2010. Fifty-six percent of
all dividend distributions were paid to tax-exempt fund shareholders and tax-deferred
household accounts. Another 36 percent were paid to taxable household accounts.

FIGURE A.3
Dividend Distributions
Billions of dollars, 1998–2010

Tax-deferred
household and Taxable Taxable
tax-exempt funds household nonhousehold Total
1998 $61 $63 $15 $138
1999 74 72 18 164
2000 75 87 24 186
2001 68 72 22 162
2002 59 44 12 114
2003 57 38 8 103
2004 65 42 10 117
2005 83 62 20 166
2006 113 92 35 240
2007 141 121 47 309
2008 135 103 38 276
2009 105 65 17 187
2010 106 68 14 188

Note: Components may not add to the total because of rounding.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 199
 Mutual Fund Capital Gains Distributions
Capital gains distributions represent a fund’s net gains, if any, from the sale of securities
held in its portfolio. When gains from these sales exceed losses, they are distributed to fund
shareholders. Mutual funds distributed $43 billion in capital gains to shareholders in 2010
(Figure A.4). Forty-nine percent of these distributions were paid to tax-deferred household
accounts, and another 42 percent were paid to taxable household accounts. Stock, bond, and
hybrid funds can distribute capital gains, but stock funds typically account for the bulk of
distributions. In 2010, 11 percent of stock fund share classes made a capital gains distribution,
and half of these share classes distributed at least 1.7 percent of their assets as capital gains.

FIGURE A.4
Capital Gains Distributions*
Billions of dollars, 1998–2010

Tax-deferred Taxable Taxable

household household nonhousehold Total
1998 $98 $61 $6 $165
1999 144 82 11 238
2000 197 116 13 326
2001 50 16 2 69
2002 10 6 1 16
2003 7 6 1 14
2004 30 21 4 55
2005 76 45 8 129
2006 161 81 14 257
2007 253 137 23 414
2008 94 31 8 132
2009 11 4 1 16
2010 21 18 4 43

* Capital gains distributions include long-term and short-term capital gains.

Note: Components may not add to the total because of rounding.

200 APPENDIX A
Types of Taxable Shareholder Transactions
An investor who sells mutual fund shares usually incurs a capital gain or loss in the year the shares
are sold; an exchange of shares between funds in the same fund family also results in either a
capital gain or loss.

Investors are liable for tax on any capital gain arising from the sale of fund shares, just as they
would be if they sold a stock, bond, or other security. Capital losses from mutual fund share sales
and exchanges, like capital losses from other investments, may be used to offset other capital gains
in the current year and thereafter.

The amount of a shareholder’s gain or loss on fund shares is determined by the difference between
the “cost basis” of the shares (generally, the purchase price—including sales loads—of the shares,
whether acquired with cash or reinvested dividends) and the sale price. Many funds voluntarily
provide cost basis information to shareholders or compute gains and losses for shares sold.
Beginning in 2012, new tax rules will require all brokers and funds to provide cost basis information
to shareholders, as well as indicate whether any gains or losses are long-term or short-term, for
fund shares acquired on or after January 2, 2012.

Tax-Exempt Funds
Tax-exempt bond funds pay dividends earned from municipal bond interest. This income is
exempt from federal income tax and, in some cases, state and local taxes as well. Tax-exempt
money market funds invest in short-term municipal securities or equivalent instruments and also
pay exempt-interest dividends. Even though income from these funds generally is tax-exempt,
investors must report it on their income tax returns. Tax-exempt funds provide investors with this
information and typically explain how to handle tax-exempt dividends on a state-by-state basis.
For some taxpayers, portions of income earned by tax-exempt funds also may be subject to the
federal alternative minimum tax.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 201
Core Principles Underlying the Regulation of U.S. Investment Companies
Embedded in the structure and regulation of mutual funds and other registered investment
companies are several core principles that provide important protections for shareholders.

Transparency
Funds are subject to more extensive disclosure requirements than any other comparable financial
product, such as separately managed accounts, collective investment trusts, and private pools. The
cornerstone of the disclosure regime for mutual funds and ETFs is the prospectus. 3 Mutual funds
and ETFs are required to maintain a current prospectus, which provides investors with information
about the fund, including its investment objectives, investment strategies, risks, fees and expenses,
and performance, as well as how to purchase, redeem, and exchange fund shares. Importantly, the
key parts of this disclosure with respect to performance information and fees and expenses are
standardized to facilitate comparisons by investors. Mutual funds and ETFs may provide investors
with a “summary prospectus” containing key information about the fund, while making more
information available on the Internet and on paper upon request.

Mutual funds and ETFs also are required to make statements of additional information (SAIs)
available to investors upon request and without charge. The SAI conveys information about
the fund that, while useful to some investors, is not necessarily needed to make an informed
investment decision. For example, the SAI generally includes information about the history of the
fund, offers detailed disclosure on certain investment policies (such as borrowing and concentration
policies), and lists officers, directors, and persons who control the fund.

The prospectus, SAI, and certain other required information are contained in the fund’s registration
statement, which is filed electronically with the Securities and Exchange Commission (SEC) and is
publicly available via the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
Mutual fund and ETF registration statements are amended at least once each year to ensure
that financial statements and other information do not become stale.4 These funds also amend
registration statements throughout the year as necessary to reflect material changes to their
disclosure.

3 Closed-end funds and UITs also provide investors with extensive disclosure, but under a slightly different regime that reflects the
way shares of these funds trade. Both closed-end funds and UITs file an initial registration statement with the SEC, containing a
prospectus and other information related to the initial offering of their shares to the public.
4 Section 10(a)(3) of the Securities Act of 1933 prohibits investment companies that make a continuous offering of shares from using
a registration statement with financial information that is more than 16 months old. As a result, mutual funds and ETFs must amend
their registration statements within four months after the end of their fiscal year.

202 APPENDIX A
In addition to registration statement disclosure, funds provide shareholders with several other
disclosure documents. Shareholders receive audited annual and unaudited semiannual reports
within 60 days after the end and the midpoint of the fund’s fiscal year. These reports contain
updated financial statements, a list of the fund’s portfolio securities, 5 management’s discussion
of financial performance, and other information current as of the date of the report.

Following their first and third quarter, funds file an additional form with the SEC, Form N-Q,
disclosing the complete schedule of their portfolio holdings. Finally, funds annually disclose how
they voted on specific proxy issues at portfolio companies on Form N-PX. Funds are the only
shareholders required to publicly disclose each and every proxy vote they cast. Funds are not
required to mail Form N-Q and Form N-PX to shareholders, but the forms are publicly available
via the SEC’s EDGAR database.

The combination of prospectuses, SAIs, annual and semiannual shareholder reports, Form N-Qs,
and Form N-PXs provide the investing public, regulators, media, and other interested parties with
far more information on funds than is available for other types of investments. This information is
easily and readily available from most funds and the SEC. It is also available from any number of
private-sector vendors, such as Morningstar, that are in the business of compiling publicly available
information on funds in ways that might benefit investors.

Daily Valuation and Liquidity

Nearly all funds offer shareholders liquidity and objective, market-based valuation of their
investments at least daily. ETF and closed-end fund shares are traded intraday on stock exchanges
at market-determined prices, giving shareholders real-time liquidity and pricing. Mutual fund
shares are redeemable on a daily basis at a price that reflects the current market value of the fund’s
portfolio securities, calculated according to pricing methodologies established by each fund’s board
of directors. The value of each security in the fund’s portfolio is determined either by a market
quotation, if a market quotation is readily available, or at fair value as determined in good faith.

The daily pricing process is a critically important core compliance function that involves numerous
staff, the fund board, and pricing vendors. The fair valuation process, a part of the overall
pricing process, receives particular scrutiny from funds, their board of directors, regulators, and
independent auditors. Under SEC rules, all funds must adopt written policies and procedures that
address the circumstances under which securities may be fair valued, and must establish criteria
for determining how to assign fair values in particular instances.6

5 A fund is permitted to include a summary portfolio schedule in its shareholder reports in lieu of the complete schedule, provided
that the complete portfolio schedule is filed with the SEC and is provided to shareholders upon request, free of charge. The summary
portfolio schedule includes each of the fund’s 50 largest holdings in unaffiliated issuers and each investment that exceeds 1 percent of
the fund’s NAV.
6 ICI has published several papers on the mutual fund valuation process. For more information, see ICI’s two white papers titled
Valuation and Liquidity Issues for Mutual Funds (February 1997 and March 2002) and two installments of ICI’s Fair Value Series,
“An Introduction to Fair Valuation” (2005) and “The Role of the Board” (2007).

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 203
This daily valuation process results in a net asset value, or NAV, for the fund. The NAV is the price
used for all mutual fund share transactions—new purchases, sales (redemptions), and exchanges
from one fund to another within the same fund family.7 It represents the current mark-to-market
value of all the fund’s assets, minus liabilities (e.g., fund expenses), divided by the total number of
outstanding shares (Figure A.5). Mutual funds release their daily NAVs to investors and others after
they complete the pricing process, generally around 6:00 p.m. eastern time. Daily fund prices are
available through fund toll-free telephone services, websites, and other means.

FIGURE A.5
Determining NAV

Fund X owns a portfolio of stocks worth $6 million;

its liabilities are $60,000; its shareholders own 500,000 shares.

Market value in dollars of securities

minus liabilities
$6,000,000 - $60,000
Net asset value (NAV)
=
$11.88
Number of investor shares outstanding
500,000

NAVs can be found on most major financial websites or

in the financial pages of most major newspapers.

The Investment Company Act of 1940 requires mutual funds to process transactions based upon
“forward pricing,” meaning that shareholders receive the next computed NAV following the fund’s
receipt of their transaction order. So, for a fund that prices its shares at 4:00 p.m., 8 orders received
prior to 4:00 p.m. receive the NAV determined that same day at 4:00 p.m. Orders received after
4:00 p.m. receive the NAV determined at 4:00 p.m. on the next business day. Forward pricing is
an important protection for mutual fund shareholders. It is designed to minimize the ability of
shareholders to take advantage of fluctuations in the price of the securities in the fund’s portfolio
that occur after the fund calculates its NAV.

7 The pricing process is also critical for ETFs, although for slightly different reasons. ETFs operate like mutual funds with respect to
transactions with “authorized participants” who trade with the ETF in large blocks, often of 50,000 shares or more. The NAV is the
price used for these large transactions. Closed-end funds are not required to strike a daily NAV, but most do so in order to provide
the market with the ability to calculate the difference between the fund’s market price and its NAV. That difference is called the fund’s
“premium” or “discount.”
8 Funds must price their shares at least once per day at a time determined by the fund’s board. Many funds price at 4:00 p.m. eastern
time or when the New York Stock Exchange closes.

204 APPENDIX A
When a shareholder redeems shares in a mutual fund, he or she can expect to be paid promptly.
Mutual funds may not suspend redemptions of their shares (subject to certain extremely limited
exceptions)9 or delay payments of redemption proceeds for more than seven days.

SEC guidelines require a mutual fund to have at least 85 percent of its assets in liquid securities.10
In part to ensure that redemptions can be made, a security is generally deemed to be liquid if it
can be sold or disposed of in the ordinary course of business within seven days at approximately
the price at which the mutual fund has valued it. Many funds adopt a specific policy with respect
to investments in illiquid securities; these policies are sometimes more restrictive than the SEC
requirements.

Oversight and Accountability

All funds are subject to a strong system of oversight from both internal and external sources.
Internal oversight mechanisms include boards of directors, which include independent directors,
and written compliance programs overseen by chief compliance officers, both at the fund and
adviser levels. External oversight is provided by the SEC, the Financial Industry Regulatory
Association (FINRA), and external service providers, such as certified public accounting firms.

Fund Boards
Mutual funds, closed-end funds, and most ETFs have boards. A fund’s board of directors is elected
by the fund’s shareholders to govern the fund, and its role is primarily one of oversight. The board
of directors typically is not involved in the day-to-day management of the fund company. Instead,
day-to-day management of the fund is handled by the fund’s investment adviser or administrator
pursuant to a contract with the fund.

Investment company directors review and approve major contracts with service providers
(including, notably, the fund’s investment adviser), approve policies and procedures to ensure
the fund’s compliance with the federal securities laws, and undertake oversight and review of
the performance of the fund’s operations. Directors devote substantial time and consider large
amounts of information in fulfilling these duties, in part because they must perform all their duties
in “an informed and deliberate manner.”

9 An example of such an exception would be an emergency that affects markets or funds, such as the assassination of President
John F. Kennedy in 1963, the blackouts that affected lower Manhattan in 1990, or earthquakes and other natural disasters. The
SEC must declare an emergency to exist to trigger an exception.
10 Money market funds are held to a stricter standard, and must limit illiquid investments to 5 percent of the portfolio.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 205
Unlike boards of operating companies, these fund boards must maintain a particular level of
independence. The Investment Company Act requires at least 40 percent of the members of a fund
board to be independent from fund management. An independent director is a fund director who
does not have any significant business relationship with a mutual fund’s adviser or underwriter. In
practice, most fund boards have far higher percentages of independent directors. As of year-end
2009, independent directors comprised at least three-quarters of boards in almost 90 percent of
fund complexes.

Independent fund directors play a critical role in overseeing fund operations and are entrusted with
the primary responsibility for looking after the interests of the fund’s shareholders. They serve
as “watchdogs,” furnishing an independent check on the management of funds. Like directors of
operating companies, they owe shareholders the duties of loyalty and care under state law. But
independent fund directors also have specific statutory and regulatory responsibilities under the
Investment Company Act beyond the duties required of other types of directors. Among other
things, for example, they oversee the performance of the fund, approve the fees paid to the
investment adviser for its services, and oversee the fund’s compliance program.

Compliance Programs
The internal oversight function played by the board has been greatly enhanced in recent years
by the development of written compliance programs and a formal requirement that all funds
have chief compliance officers. Rules adopted in 2003 require every fund and adviser to have a
CCO who administers a written compliance program reasonably designed to prevent, detect, and
correct violations of the federal securities laws. Compliance programs must be reviewed at least
annually for their adequacy and effectiveness, and fund CCOs are required to report directly to the
independent directors.

Regulatory Oversight
Internal oversight is accompanied by a number of forms of external oversight and accountability.
Funds are subject to inspections, examinations, and enforcement by their primary regulator, the
SEC. Funds are also overseen by self-regulatory organizations, such as FINRA and stock exchanges;
state securities regulators; and banking regulators (to the extent the fund is affiliated with a bank).

Auditors
Funds’ financial statement disclosure is also subject to several internal and external checks.
For example, annual reports include audited financial statements certified by a certified public
accounting firm subject to oversight by the Public Company Accounting Oversight Board (PCAOB).
This ensures that the financial statements are prepared in conformity with generally accepted
accounting principles (GAAP) and present fairly the fund’s financial position and results of
operations.

206 APPENDIX A
Sarbanes-Oxley
Like officers of public companies, fund officers are required to make certifications and disclosures
required by the Sarbanes-Oxley Act. For example, they must certify the accuracy of the financial
statements.

Additional Regulation of Advisers

In addition to the system of oversight applicable directly to funds, investors enjoy protections
through SEC regulation of the investment advisers that manage fund portfolios. All advisers
to registered funds are required to register with the SEC, and are subject to SEC oversight and
disclosure requirements. Advisers also owe a fiduciary duty to each fund they advise, meaning that
they have a fundamental legal obligation to act in the best interests of the fund pursuant to a duty
of undivided loyalty and utmost good faith.

Limits on Leverage
The inherent nature of a fund—a professionally managed pool of securities owned pro rata by its
investors—is straightforward and easily understood by investors. The Investment Company Act
fosters simplicity by prohibiting complex capital structures and limiting funds’ use of leverage.

The Investment Company Act imposes various requirements on the capital structure of mutual
funds, closed-end funds, and ETFs, including limitations on the issuance of “senior securities” and
borrowing. These limitations greatly minimize the possibility that a fund’s liabilities will exceed the
value of its assets.

Generally speaking, a senior security is any debt that takes priority over the fund’s shares, such
as a loan or preferred stock. The SEC has historically interpreted the definition of senior security
broadly, taking the view that selling securities short, purchasing securities on margin, and investing
in many types of derivative instruments, among other practices, may create senior securities.

The SEC also takes the view that the Investment Company Act prohibits a fund from creating a
future obligation to pay unless it “covers” the obligation. A fund generally can cover an obligation
by owning the instrument underlying that obligation. For example, a fund that wants to take a short
position in a certain stock can comply with the Investment Company Act by owning an equivalent
long position in that stock. The fund can also cover by earmarking or segregating liquid securities
equal in value to the fund’s potential exposure from the leveraged transaction. The assets set aside
to cover the potential future obligation must be liquid, unencumbered, and marked-to-market daily.
They may not be used to cover other obligations and, if disposed of, must be replaced.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 207
The Investment Company Act also limits borrowing. With the exception of certain privately
arranged loans and temporary loans, any promissory note or other indebtedness would generally
be considered a prohibited senior security.11 Mutual funds and ETFs are permitted to borrow from
a bank if, immediately after the bank borrowing, the fund’s total net assets are at least three
times total aggregate borrowings. In other words, the fund must have at least 300 percent asset
coverage.

Closed-end funds have a slightly different set of limitations. They are permitted to issue debt and
preferred stock, subject to certain conditions, including asset coverage requirements of
300 percent for debt and 200 percent for preferred stock.

Many funds voluntarily go beyond the prohibitions in the Investment Company Act, adopting
policies that further restrict their ability to issue senior securities or borrow. Funds often,
for example, adopt a policy stating that they will borrow only as a temporary measure for
extraordinary or emergency purposes and not to finance investment in securities. In addition,
they may disclose that, in any event, borrowings will be limited to a small percentage of fund
assets (such as 5 percent). These are meaningful voluntary measures, because under the
Investment Company Act, a fund’s policies on borrowing money and issuing senior securities
cannot be changed without the approval of fund shareholders.

Custody
To protect fund assets, the Investment Company Act requires all funds to maintain strict
custody of fund assets, separate from the assets of the adviser. Although the Act permits other
arrangements,12 nearly all funds use a bank custodian for domestic securities. Foreign securities
are required to be held in the custody of a foreign bank or securities depository.

A fund’s custody agreement with a bank is typically far more elaborate than the arrangements
used for other bank clients. The custodian’s services generally include safekeeping and accounting
for the fund’s assets, settling securities transactions, receiving dividends and interest, providing
foreign exchange services, paying fund expenses, reporting failed trades, reporting cash
transactions, monitoring corporate actions at portfolio companies, and tracing loaned securities.

11 Temporary loans cannot exceed 5 percent of the fund’s total net assets and must be repaid within 60 days.
12 The Investment Company Act contains six separate custody rules for the different types of possible custody arrangements for mutual
funds, closed-end funds, and ETFs. UITs are subject to a separate rule that requires the use of a bank to maintain custody.

208 APPENDIX A
The strict rules on the custody and reconciliation of fund assets are designed to prevent the types
of theft and other fraud-based losses that have occurred in less-regulated investment products.13
Shareholders are further insulated from these types of losses by a provision in the Investment
Company Act that requires all mutual funds to have fidelity bonds designed to protect them against
possible instances of employee larceny or embezzlement.

Prohibitions on Transactions with Affiliates

The Investment Company Act contains a number of strong and detailed prohibitions on transactions
between the fund and fund insiders or affiliated organizations (such as the corporate parent of
the fund’s adviser). Many of these prohibitions were part of the original statutory text of the
Act, enacted in 1940 in response to instances of overreaching and self-dealing by fund insiders
during the 1920s in the purchase and sale of portfolio securities, loans by funds, and investments
in related funds. The SEC’s Division of Investment Management has said that “for more than
50 years, [the affiliated transaction prohibitions] have played a vital role in protecting the interests
of shareholders and in preserving the industry’s reputation for integrity; they continue to be among
the most important of the Act’s many protections.” 14

Although there are a number of affiliated transaction prohibitions in the Investment Company Act,
three are particularly noteworthy:

»» Generally prohibiting direct transactions between a fund and an affiliate

»» Generally prohibiting joint transactions, where the fund and affiliate are acting together
vis-à-vis a third party
»» Preventing investment banks from placing or “dumping” unmarketable securities with
an affiliated fund by generally prohibiting the fund from buying securities in an offering
syndicated by an affiliated investment bank

13 Ponzi schemes and other frauds involving the misappropriation of assets in unregistered pools or private accounts have comprised
a significant portion of SEC enforcement cases in recent years.
14 See Protecting Investors: A Half Century of Investment Company Regulation, Report of the Division of Investment Management,

Securities and Exchange Commission (May 1992), available at http://www.sec.gov/divisions/investment/guidance/icreg50-92.pdf.

The Division of Investment Management is the division within the SEC responsible for the regulation of funds.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 209
Diversification
Both tax law and the Investment Company Act provide diversification standards for funds. As
discussed in detail above, under the tax laws, all mutual funds, closed-end funds, and ETFs, as well
as most UITs, qualify as RICs and, as such, must meet a tax diversification test every quarter. The
effect of this test is that a fund with a modest cash position and no government securities would
hold securities from at least 12 different issuers. Another tax diversification restriction limits the
amount of an issuer’s outstanding voting securities that a fund may own.

The securities laws set higher standards for funds that elect to be diversified. If a fund elects to
be diversified, the Investment Company Act requires that, with respect to at least 75 percent of
the portfolio, no more than 5 percent may be invested in the securities of any one issuer and no
investment may represent more than 10 percent of the outstanding voting securities of any issuer.
Diversification is not mandatory, but all mutual funds, closed-end funds, and ETFs must disclose
whether they are diversified under the Act’s standards or not.

In practice, most funds that elect to be diversified are much more highly diversified than they need
to be to meet these two tests. As of December 2010, for example, the median number of stocks
held by U.S. equity funds was 101.15

15 This number is the median (the midpoint of a range of numbers that are arranged in order of value) among U.S. actively managed
and index equity funds, excluding sector funds.

210 APPENDIX A
Appendix B
Significant Events in Fund History

1774 Dutch merchant and broker Adriaan van Ketwich invites subscriptions from investors
to form a trust, the Eendragt Maakt Magt, with the aim of providing investment
diversification opportunities to investors of limited means.

1868 The Foreign and Colonial Government Trust, the precursor to the U.S. investment fund
model, is formed in London. This trust provides “the investor of moderate means the
same advantages as large capitalists.”

1924 The first mutual funds are established in Boston.

1933 The Securities Act of 1933 regulates the registration and offering of new securities,
including mutual fund and closed-end fund shares, to the public.

1934 The Securities Exchange Act of 1934 authorizes the Securities and Exchange Commission
(SEC) to provide for fair and equitable securities markets.

1936 The Revenue Act of 1936 establishes the tax treatment of mutual funds and their
shareholders. Closed-end funds were covered by the Act in 1942.

1940 The Investment Company Act of 1940 is signed into law, setting the structure and
regulatory framework for registered investment companies. The forerunner to the
National Association of Investment Companies (NAIC) is formed. The NAIC will become
the Investment Company Institute.

1944 The NAIC begins collecting investment company industry statistics.

1951 The total number of mutual funds surpasses 100, and the number of shareholder
accounts exceeds one million for the first time.

1954 Households’ net purchases of fund shares exceed those of corporate stock. NAIC
initiates a nationwide public information program emphasizing the role of investors
in the U.S. economy and explaining the concept of investment companies.

SIGNIFICANT EVENTS IN FUND HISTORY 211

1955 The first U.S.-based international mutual fund is introduced.

1961 The first tax-free unit investment trust is offered. The NAIC changes its name to the
Investment Company Institute (ICI) and welcomes fund advisers and underwriters as
members.

1962 The Self-Employed Individuals Tax Retirement Act creates savings opportunities
(Keogh plans) for self-employed individuals.

1971 Money market funds are introduced.

1974 The Employee Retirement Income Security Act (ERISA) creates the individual retirement
account (IRA) for workers not covered by employer-sponsored retirement plans.

1976 The Tax Reform Act of 1976 permits the creation of municipal bond funds. The first retail
index fund is offered.

1978 The Revenue Act of 1978 creates new Section 401(k) retirement plans and simplified
employee pensions (SEPs).

1981 The Economic Recovery Tax Act establishes “universal” IRAs for all workers. IRS
proposes regulations for Section 401(k).

1986 The Tax Reform Act of 1986 reduces IRA deductibility.

1987 ICI welcomes closed-end funds as members.

1989 Mutual fund assets top $1 trillion.

1993 The first exchange-traded fund (ETF) shares are issued.

1996 Enactment of the National Securities Markets Improvement Act of 1996 (NSMIA)
provides a more rational system of state and federal regulation, giving the SEC exclusive
jurisdiction for registering and regulating mutual funds, exchange listed securities, and
larger advisers. States retain their antifraud authority and responsibility for regulating
nonexchange listed offerings and smaller advisers. The Small Business Job Protection
Act creates SIMPLE plans for employees of small businesses.

1997 The Taxpayer Relief Act of 1997 creates the Roth IRA and eliminates restrictions on
portfolio management that disadvantage fund shareholders.

212 APPENDIX B
1998 The SEC approves the most significant disclosure reforms in the history of U.S. mutual
funds, encompassing “plain English,” fund profiles, and improved risk disclosure.

1999 The Gramm-Leach-Bliley Act modernizes financial services regulation and enhances
financial privacy.

2001 Enactment of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of
2001 significantly expands retirement savings opportunities for millions of working
Americans.

2003 The Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) provides mutual fund
shareholders with the full benefits of lower tax rates on dividends and capital gains.

2006 Enactment of the Pension Protection Act (PPA) and the Tax Increase Prevention and
Reconciliation Act provides incentive for investors young and old to save more in tax-
deferred and taxable investment accounts.

2008 SEC votes to adopt Summary Prospectus rule.

Reserve Primary Fund fails to maintain $1.00 NAV, becoming the second money market
fund in 25 years to “break a dollar.”

2009 Money market fund assets hit $3.92 trillion, their highest level to date.
The Money Market Working Group, a task force of senior industry executives, submits
its report to the ICI Board. The Board endorses the Working Group’s call for immediate
implementation of new regulatory and oversight standards for money market funds.

2010 SEC adopts new rules and amendments to regulations governing money market funds.
In Jones v. Harris, the U.S. Supreme Court unanimously upholds the Gartenberg
standard under which courts have long considered claims of excessive fund advisory
fees.
Enactment of the Regulated Investment Company Modernization Act streamlines and
updates technical tax rules, benefiting shareholders by making funds more efficient.

SIGNIFICANT EVENTS IN FUND HISTORY 213

Glossary

adviser. An organization employed by a mutual fund to give professional advice on the fund’s
investments and asset management practices. Also known as investment adviser.
after-tax return. The total return of a fund after the effects of taxes on distributions and/or
redemptions have been assessed. Funds are required by federal securities law to calculate after-
tax returns using standardized formulas based upon the highest tax rates. (Consequently, they are
not representative of the after-tax returns of most mutual fund shareholders.) These standardized
after-tax returns are not relevant for shareholders in tax-deferred retirement accounts.
annual report. A report that a fund sends to its shareholders that discusses the fund’s performance
over the past fiscal year and identifies the securities in the fund’s portfolio on the last business
day of the fund’s fiscal year. The annual report includes audited financial statements. See also
semiannual report.
appreciation. An increase in an investment’s value. Contrast depreciation.
assets. Securities, cash, and receivables owned by a fund.
auction market preferred stock (AMPS). A type of preferred share. AMPS are structured to pay
dividends at rates set through auctions run by an independent auction agent.
authorized participant. An entity, usually an institutional investor, that submits orders to the
exchange-traded fund (ETF) for the creation and redemption of ETF “creation units.”
automatic reinvestment. A fund service giving shareholders the option to purchase additional
shares using dividend and capital gains distributions.
average portfolio maturity. The average maturity of all the securities in a bond or money market
fund’s portfolio.
back-end load. See contingent deferred sales load (CDSL).
basis point. One one-hundredth of 1 percent (0.01 percent); thus, 100 basis points equal 1 percent.
When applied to $1.00, 1 basis point is $0.0001; 100 basis points equal one cent ($0.01).
bear market. A period during which the majority of securities prices in a particular market
(such as the stock market) drop substantially. One generally accepted measure is a price decline
of 20 percent or more over at least a two-month period. Contrast bull market.
bond. A debt security issued by a company, municipality, or government agency. A bond investor
lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a
specified maturity date; the issuer usually pays the bondholder periodic interest payments over the
life of the loan.

214 GLOSSARY
break the dollar. A phrase used to describe when the net asset value (NAV) of a money market
fund is repriced from its stable $1.00 NAV, an event that could be triggered by a deviation greater
than one-half of 1 percent (one-half cent, or $0.0050) between the fund’s mark-to-market value
(shadow price) and its stable $1.00 NAV. Also known as break the buck.
breakpoints. The dollar amounts at which many mutual funds offer reduced fees to investors.
There are two kinds of breakpoints. One kind is a reduction in sales charges (load fees) to
investors when they initially purchase fund shares. The amount of the discount varies, depending
upon the amount of the investment: the more invested, the greater the likelihood of surpassing
a “breakpoint” and thus receiving a discount. The other kind of breakpoint is a reduction in
management fees that fund advisers may charge their associated funds as fund assets surpass
a given level.
broker-dealer. A firm that buys and sells mutual fund shares and other securities from and to
investors, operating as either a broker or dealer depending on the transaction.
bull market. A period during which a majority of securities prices in a particular market (such as
the stock market) rise substantially. Contrast bear market.
capital gains distributions. Profits distributed to shareholders resulting from the sale of securities
held in the fund’s portfolio.
catch-up contribution. Individuals aged 50 or older are permitted to make contributions to an IRA
or employer-sponsored retirement savings plan in excess of the annual contribution limit. In 2010,
the catch-up limit was $1,000 for IRAs, $2,500 for SIMPLE plans, and $5,500 for 401(k) plans.
certificate of deposit (CD). A savings certificate entitling the bearer to receive interest. A CD bears
a fixed maturity date, has a specified fixed interest rate, and can be issued in any denomination.
CDs are generally issued by commercial banks and are currently insured by the Federal Deposit
Insurance Corporation (FDIC) up to a maximum of $250,000. CDs are generally offered at terms
ranging from one month to five years.
closed-end fund. A type of investment company that issues a fixed number of shares that trade
intraday on stock exchanges at market-determined prices. Investors in a closed-end fund buy or
sell shares through a broker, just as they would trade the shares of any publicly traded company.
commercial paper. Short-term, unsecured notes issued by a corporation to meet immediate
short-term needs for cash, such as the financing of accounts payable, inventories, and short-term
liabilities. Maturities typically range from overnight to 270 days. Commercial paper is usually issued
by corporations with high credit ratings and sold at a discount from face value.
commission. A fee paid to a broker or other sales agent for services related to transactions in
securities.
compounding. The effect of growth on reinvestment of future earnings. Over time, compounding
can produce significant growth in the value of an investment.
contingent deferred sales load (CDSL). A fee imposed by some funds when shares are redeemed
(sold back to the fund) during the first few years of ownership. Also known as back-end load.

GLOSSARY 215
Coverdell Education Savings Account (ESA). This type of account, formerly known as an
education IRA, is a tax-advantaged trust or custodial account set up to pay the qualified education
expenses of a designated beneficiary.
creation unit. A specified number of shares issued by an exchange-traded fund (ETF) in large
blocks, generally between 25,000 and 200,000 shares. Authorized participants that buy creation
units either keep the ETF shares that make up the creation unit or sell all or part of them on a stock
exchange.
credit risk. The possibility that a bond issuer may not be able to pay interest or repay its debt.
credit spread. The additional yield required of a debt security beyond that of a risk-free alternative
(such as a U.S. Treasury instrument of the same maturity).
custodian. An organization, usually a bank, that safeguards the securities and other assets of a
mutual fund.
default. A failure by an issuer to: (1) pay principal or interest when due, (2) meet nonpayment
obligations, such as reporting requirements, or (3) comply with certain covenants in the document
authorizing the issuance of a bond (an indenture).
defined benefit (DB) plan. An employer-sponsored pension plan where the amount of future
benefits an employee will receive from the plan is defined, typically by a formula based on salary
history and years of service. The amount of contributions the employer is required to make will
depend on the investment returns experienced by the plan and the benefits promised. Contrast
defined contribution plan.
defined contribution (DC) plan. An employer-sponsored retirement plan, such as a 401(k) plan
or a 403(b) plan, in which contributions are made to individual participant accounts. Depending
on the type of DC plan, contributions may be made by the employee, the employer, or both. The
employee’s benefits at retirement or termination of employment are based on the employee and
employer contributions and earnings and losses on those contributions. See also 401(k) plan.
Contrast defined benefit plan.
depreciation. A decline in an investment’s value. Contrast appreciation.
distribution. (1) The payment of dividends and capital gains, or (2) a term used to describe a
method of selling fund shares to the public.
diversification. The practice of investing broadly across a number of different securities,
industries, or asset classes to reduce risk. Diversification is a key benefit of investing in mutual
funds and other investment companies that have diversified portfolios.
dollar-cost averaging. The practice of investing a fixed amount of money at regular intervals,
regardless of whether the securities markets are declining or rising, in the hopes of reducing
average share cost by acquiring more shares when prices are low and fewer shares when prices
are high.
education IRA. See Coverdell Education Savings Account (ESA).
equity fund. See stock fund.

216 GLOSSARY
exchange privilege. A fund option enabling shareholders to transfer their investments from one
fund to another within the same fund family as their needs or objectives change. Typically, fund
companies allow exchanges several times a year for a low fee or no fee.
exchange-traded fund (ETF). An investment company, typically a mutual fund or unit investment
trust, whose shares are traded intraday on stock exchanges at market-determined prices. Investors
may buy or sell ETF shares through a broker just as they would the shares of any publicly traded
company.
ex-dividend date. With regard to mutual funds, this is the day on which declared distributions
(dividends or capital gains) are deducted from the fund’s assets before it calculates its net asset
value (NAV). The NAV per share will drop by the amount of the distribution per share.
expense ratio. A fund’s total expenses—disclosed in the prospectus and shareholder reports—
expressed as a percentage of its assets.
face value. The stated principal or redemption value of a bond; the amount that a bond’s issuer
must repay at the bond’s maturity date.
fair value. The price for a security which the fund might reasonably expect to receive upon its
current sale.
family of funds. A group or “complex” of mutual funds, each typically with its own investment
objective, managed and distributed by the same company.
federal funds. Non-interest-bearing deposits held by member banks at the Federal Reserve.
Financial Industry Regulatory Authority (FINRA). A self-regulatory organization with authority
over broker-dealer firms that distribute mutual fund shares as well as other securities.
529 Plan. An investment program, offered by state governments, designed to help pay future
qualified higher education expenses. States offer two types of 529 plans: prepaid tuition programs
allow contributors to establish an account in the name of a student to cover the cost of a specified
number of academic periods or course units in the future at current prices; and college savings
plans allow individuals to contribute to an investment account to pay for a student’s qualified
higher education expenses.
forward pricing. The concept describing the price at which mutual fund shareholders buy or
redeem fund shares. Shareholders must receive the next computed share price following the fund’s
receipt of a shareholder transaction order.
457 plan. An employer-sponsored retirement plan that enables employees of state and local
governments and other tax-exempt employers to make tax-deferred contributions from their
salaries to the plan.
401(k) plan. An employer-sponsored retirement plan that enables employees to make tax-deferred
contributions from their salaries to the plan. See also defined contribution plan.
403(b) plan. An employer-sponsored retirement plan that enables employees of universities,
public schools, and nonprofit organizations to make tax-deferred contributions from their salaries
to the plan.

GLOSSARY 217
front-end load. A fee imposed by some funds at the point of purchase.
funds of funds. Mutual funds that primarily hold and invest in shares of other mutual funds.
fund supermarket. A brokerage platform that provides access to funds from a wide range of fund
families.
health savings account (HSA). A plan that allows workers with high-deductible health insurance
coverage to set aside money each year for routine or future health care costs.
hedge fund. A private investment pool for qualified (typically wealthy) investors that, unlike a
mutual fund, is exempt from SEC registration.
hybrid fund. A mutual fund that invests in a mix of equity and fixed-income securities.
income distributions. Dividends, interest, and/or short-term capital gains paid to a mutual
fund’s shareholders. Operating expenses are deducted from income before it is distributed to
shareholders.
independent director. A fund director or trustee who does not have any significant business
relationship with a mutual fund’s adviser or underwriter. An independent director better enables
the fund board to provide an independent check on the fund’s management.
index mutual fund. A fund designed to track the performance of a market index. The fund’s
portfolio of securities is either a replicate or a representative sample of the designated market
index.
individual retirement account (IRA). A tax-deferred account set up by or for an individual to hold
and invest funds for retirement.
inflation risk. The risk that the purchasing power of the future value of assets or income will be
lower due to inflation.
initial public offering (IPO). A corporation’s or closed-end fund’s first offering of stock or fund
shares to the public.
institutional investor. The businesses, nonprofit organizations, and other similar investors who
own funds and other securities on behalf of their organizations. This classification of investors
differs from individual or household investors who own the majority of investment company assets.
interest rate risk. Risk of gain or loss on a security due to possible changes in interest-rate levels.
When interest rates rise, the market value of a debt security will fall, and vice versa.
intraday indicative value (IIV). A real-time estimate of an exchange-traded fund’s (ETF) intraday
value. Third-party providers calculate and disseminate this measure every 15 to 60 seconds during
securities market trading hours.
investment adviser. See adviser.
investment company. A corporation, trust, or partnership that invests pooled shareholder dollars
in securities appropriate to the organization’s objective. Mutual funds, closed-end funds, unit
investment trusts, and exchange-traded funds are the main types of SEC-registered investment
companies.

218 GLOSSARY
investment objective. The goal (e.g., current income, long-term capital growth) that a mutual fund
pursues on behalf of its investors.
issuer. The company, municipality, or government agency that issues securities, such as stocks,
bonds, or money market instruments.
Keogh. A tax-favored investment vehicle covering self-employed individuals, partners, and owners
of unincorporated businesses; also called an H.R. 10 plan. These were first made available by
Congress in 1962, but today operate under rules very similar to those for retirement plans for a
corporation’s employees.
lifecycle fund. See target date fund.
lifestyle fund. Mutual funds that maintain a predetermined risk level and generally use words such
as “conservative,” “moderate,” or “aggressive” in their names to indicate the fund’s risk level. Also
known as target risk fund.
liquidity. The ability to gain ready access to invested money. Mutual funds are liquid because
their shares can be redeemed for the next computed net asset value on any business day. In the
money market, a security is said to be liquid if the spread between bid and ask prices is narrow and
reasonably sized trades can take place at those quotes.
load. See sales charge.
load fund. A mutual fund that imposes a sales charge—either when fund shares are purchased
(front-end load) or redeemed (contingent deferred sales load)—or a fund that charges a 12b-1 fee
greater than 0.25 percent.
long-term funds. A mutual fund industry designation for all funds other than money market funds.
Long-term funds are broadly divided into equity (stock), bond, and hybrid funds.
management fee. The amount paid by a mutual fund to the investment adviser for its services.
market value. The price at which a security was last traded or a market maker or dealer is currently
offering to trade and could presumably be purchased or sold.
maturity. The date by which an issuer promises to repay a bond’s face value.
money market. The global financial market for short-term borrowing and lending where short-term
instruments such as Treasury bills, commercial paper, and repurchase agreements are bought and
sold.
money market fund. A mutual fund that invests in short-term, high-grade fixed-income securities,
and seeks the highest level of income consistent with preservation of capital (i.e., maintaining a
stable share price).
MuniFund Term Preferred (MTP) shares. Exchange-listed closed-end fund preferred shares that
have a fixed dividend rate set at the time of issuance. MTP shares have a mandatory redemption
period (usually five years) unless they are redeemed or repurchased earlier by the fund. Unlike
fixed-rate preferred stock previously issued, MTP shares were created for issuance by closed-end
funds investing in municipal bonds.

GLOSSARY 219
mutual fund. An investment company that buys a portfolio of securities selected by a professional
investment adviser to meet a specified financial goal (investment objective). Mutual funds can
have actively managed portfolios, where a professional investment adviser creates a unique mix of
investments to meet a particular investment objective, or passively managed portfolios, in which
the adviser seeks to track the performance of a selected benchmark or index. One hallmark of
mutual funds is that they issue “redeemable securities,” meaning that the fund stands ready to buy
back its shares at their current net asset value. See also open-end investment company.
net asset value (NAV). The per-share value of an investment company, calculated by subtracting
the fund’s liabilities from the current market value of its assets and dividing by the number of
shares outstanding. Mutual funds calculate their NAVs at least once daily.
net new cash flow. The dollar value of new sales minus redemptions, plus net exchanges. A
positive number indicates new sales plus exchanges into funds exceeded redemptions plus
exchanges out of funds. A negative number indicates redemptions plus exchanges out of funds
exceeded new sales plus exchanges into funds.
no-load fund. A mutual fund whose shares are sold without a sales commission and without a
12b-1 fee of more than 0.25 percent per year.
open-end investment company. The legal name for a mutual fund, indicating that it stands ready
to redeem (buy back) its shares from investors.
operating expenses. Business costs paid from a fund’s assets. These include management fees,
12b-1 fees, and other expenses.
payroll deduction plan. An arrangement that some employers offer employees where employees
can authorize their employer to deduct a specified amount from their salaries at stated times to buy
mutual fund shares.
pooled investing. The basic concept behind mutual funds in which a fund aggregates the assets
of investors who share common financial goals. A fund uses the pool assets to buy a diversified
portfolio of investments, and each mutual fund share purchased represents ownership in all the
fund’s underlying securities.
portfolio. A collection of securities owned by an individual or an institution (such as a mutual fund)
that may include stocks, bonds, money market instruments, and other securities.
portfolio manager. A specialist employed by a mutual fund’s adviser to invest the fund’s assets in
accordance with predetermined investment objectives.
portfolio turnover. A measure of the trading activity in a fund’s investment portfolio; how often
securities are bought and sold by a fund.
prepayment risk. The possibility that a bond owner will receive his or her principal investment
back from the issuer prior to the bond’s maturity date.
principal. See face value.
prospectus. The official document that describes an investment company to prospective investors.
The prospectus contains information required by the SEC, such as investment objectives and
policies, risks, services, and fees.

220 GLOSSARY
puttable preferred stock. See Variable Rate Demand Preferred (VRDP) shares.
quality. A term used in portfolio management to describe the creditworthiness of an issuer of
fixed-income securities and indicate the likelihood that the issuer will be able to repay its debt.
redeem. To sell mutual fund shares back to the fund. Mutual fund shares may be redeemed on any
business day. An investor receives the next computed share price, called net asset value (NAV),
minus any deferred sales charge or redemption fee.
redemption price. The amount per share that mutual fund shareholders receive when they redeem.
reinvestment privilege. An option whereby shareholders may elect to use dividend and capital
gains distributions to automatically buy additional fund shares.
repurchase agreements. A form of short-term funding for dealers. The dealer sells the securities to
investors, usually on an overnight basis, and buys them back at a higher price reflecting the cost of
funding.
required minimum distribution (RMD). Minimum distribution rules require that beginning at age
70½, the entire amount of a traditional IRA be distributed over the expected life of the individual
(or the joint lives of the individual and designated beneficiary). Distributing less than the required
amount will result in a tax penalty. Roth IRAs are not subject to required minimum distributions
during the account holder’s lifetime.
risk/return tradeoff. The principle that an investment must offer higher potential returns as
compensation for the likelihood of higher volatility in returns.
rollover. The transfer of an investor’s assets from one qualified retirement plan (including an IRA)
to another—due to changing jobs, for instance—without a tax penalty.
Roth IRA. An individual retirement plan, first available in 1998, that permits only after-tax
contributions; earnings are not taxed, and qualified distributions of earnings and principal are
generally tax-free.
sales charge. An amount charged for the sale of some fund shares, usually those sold by brokers
or other sales professionals. By regulation, mutual fund sales charges are capped. The charge may
vary depending on the amount invested and the fund chosen. Also known as the load.
SAR-SEP IRA (salary reduction simplified employee pension). A SEP IRA with a salary reduction
feature (see SEP IRA). The Small Business Job Protection Act of 1996, which created SIMPLE IRAs,
prohibited the formation of new SAR-SEP IRAs, which were created in 1986.
secondary market. Market in which an investor purchases or sells certain investment company
shares (closed-end, UIT, and ETF) from another investor through an intermediary such as a
broker-dealer.
Securities and Exchange Commission. See U.S. Securities and Exchange Commission (SEC).
securitization. The process of aggregating similar instruments, such as loans or mortgages, into a
negotiable security, such as the creation of mortgage-backed securities.

GLOSSARY 221
semiannual report. A report a fund sends to its shareholders that discusses the fund’s
performance over the first six months of the fiscal year and identifies the securities in the fund’s
portfolio on the last business day of the first six months of the fiscal year. See also annual report.
SEP IRA (simplified employee pension plan). A retirement program created in 1978 that consists
of individual retirement accounts for all eligible employees, to which the employer can contribute
according to certain rules. A fairly simple, inexpensive plan to establish and administer, a SEP can
be attractive to small businesses and self-employed individuals.
series fund. A group of different mutual funds, each with its own investment objective and
policies, that is structured as a single corporation or business trust.
share classes. Some mutual funds offer investors different types of shares known as classes.
Each class will invest in the same portfolio of securities and will have the same investment
objectives and policies, but each class will have different shareholder services and/or distribution
arrangements with different fees and expenses and, therefore, different performance results. A
multiclass structure offers investors the ability to select a fee and expense structure that is most
appropriate for their investment goals (including the time that they expect to remain invested in
the fund).
shareholder. An investor who owns shares of a mutual fund or other company.
short-term fund. See money market fund.
SIMPLE IRA (savings incentive match plan for employees). A simplified tax-favored retirement
plan created in 1996 that small employers can set up for the benefit of their employees.
Standard & Poor’s 500 index (S&P 500). A daily measure of stock market performance based on
500 U.S. stocks chosen for market size, liquidity, and industry group representation.
statement of additional information (SAI). The supplementary document to a prospectus that
contains more detailed information about a fund; also known as “Part B” of the prospectus.
stock. A share of ownership or equity in a corporation.
stock fund. A fund that concentrates its investments in stocks.
summary prospectus. A short-form prospectus that mutual funds and exchange-traded funds
(ETFs) may use with investors if the fund meets certain requirements, including making the long-
form prospectus and additional information available online or in paper upon request. See also
prospectus.
target date fund. Hybrid funds that follow a predetermined reallocation of risk over a working
career and into retirement for a person expecting to retire at the target date of the fund (which
is usually included in the fund’s name). These funds invest in a mix of asset classes and typically
rebalance their portfolios over time to become more conservative and income-producing. Also
known as lifecycle fund.
target risk fund. See lifestyle fund.
total net assets. The total amount of assets, less any liabilities, a fund holds as of a certain date.

222 GLOSSARY
total return. A measure of a fund’s performance that encompasses all elements of return:
dividends, capital gains distributions, and changes in net asset value. Total return is the change in
value of an investment over a given period, assuming reinvestment of any dividends and capital
gains distributions, expressed as a percentage of the initial investment.
traditional IRA. The first type of individual retirement account, created in 1974. Individuals
may make tax-deductible or nondeductible (depending on income and other requirements)
contributions to these accounts. See also individual retirement account (IRA).
transfer agent. The internal or external organization that a mutual fund uses to prepare and
maintain records relating to shareholder accounts.
Treasury bill (T-bill). A short-term debt obligation of the U.S. government with a maturity of less
than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million
and commonly have maturities of one month (four weeks), three months (13 weeks), or six months
(26 weeks).
12b-1 fee. A mutual fund fee, named for the SEC rule that permits it, used to pay distribution costs,
such as compensation to financial advisers for initial and ongoing assistance. If a fund has a 12b-1
fee, it will be disclosed in the fee table of a fund’s prospectus.
underwriter. The organization that sells a mutual fund’s shares to broker-dealers and investors.
unit investment trust (UIT). A type of fund with some characteristics of mutual funds and some
of closed-end funds. Like mutual funds, UITs issue redeemable shares. Like closed-end funds,
however, UITs typically issue only a specific, fixed number of shares. A UIT does not actively trade
its investment portfolio, instead buying and holding a set of particular investments until a set
termination date, at which time the trust is dissolved and proceeds are paid to shareholders.
U.S. Securities and Exchange Commission (SEC). The primary U.S. government agency
responsible for the regulation of the day-to-day operations and disclosure obligations of registered
investment companies.
variable annuity. An investment contract sold by an insurance company; capital is accumulated,
often through mutual fund investments, with the option to convert to an income stream in
retirement.
Variable Rate Demand Preferred (VRDP) shares. A type of puttable preferred stock that is similar
to auction market preferred stock (AMPS) in that they pay dividends at variable rates, and sell
orders are filled to the extent there are bids. Rates are set through remarketings, and if there are
more sell orders than bids, a third party (commonly referred to as a liquidity provider) purchases
the VRDP shares.
withdrawal plan. A fund service allowing shareholders to receive income or principal payments
from their fund account at regular intervals.
yield. A measure of income (dividends and interest) earned by the securities in a fund’s portfolio
less the fund’s expenses during a specified period. A fund’s yield is expressed as a percentage of
the maximum offering price per share on a specified date.

GLOSSARY 223
Index

A page number with an f indicates a figure; an n indicates a note; a t indicates a table. Page numbers in bold indicate a definition.

12b-1 fees, 72–75, 73f, 75f, 223 B

401(k) plans, 217 back-end load, 214
account balances, 108, 108f back-end load funds, 74, 76f, 77f
asset allocation, 104–7, 105f, 106f balanced mutual funds, 105–6, 105f
assets, 101f, 103–4, 104f bank and thrift assets, 34, 35f, 112, 112f, 115, 115f
front-end load discounts for, 74 bank notes, 170t, 171t
household financial assets in, 9 basis points, 214
loans outstanding, 108 bear market, 214
mutual fund assets, 9, 11f, 118, 118f, 119, 119f bear market effects, 14, 27, 27f, 30, 72, 89f, 90f
mutual fund purchases through, 85, 85f, 86, 86f boards of directors, 193f, 193n1, 194, 205–6
no-load fund investments, 75 bond and income funds, 130t, 132t
participant demographics, 105–6, 105f bond closed-end funds, 52f, 55, 55f, 56, 56f, 57, 57f, 138t, 139t
portfolio turnover, 110 bond ETFs, 46, 46f, 47f, 140t, 141t, 142t
services and expenses, 109–11, 111f bond funds
target date funds in, 106–7, 107f, 120, 121f 401(k) asset allocation, 105–6, 105f
403(b) plans, 217 capital gains paid and reinvested, 159t
assets, 101f, 103–4, 104f, 118, 118f closed-end fund shareholder ownership of, 60, 60f
mutual fund assets, 11f, 119, 119f demand for, 22, 29–30, 29f
mutual fund purchases through, 85, 85f, 86, 86f dividends paid and reinvested, 158t, 199f, 201
457 plans, 217 ETF shareholder ownership of, 50, 50f
assets, 101f, 103–4, 104f, 118 exchange redemptions, 154t
mutual fund assets, 11f, 118f, 119, 119f exchange sales, 152t
mutual fund purchases through, 85, 85f, 86, 86f expense ratios, 64–65, 64f, 65f, 68, 68f
529 plans, 96f, 120, 122–23, 122f, 123f, 217 individual accounts, 184t
institutional accounts, 96f, 184t, 185t
A international assets, with, 8
actively managed ETFs, 40, 42, 48, 140t, 141t, 142t
investor age and risk tolerance, 30
actively managed mutual funds, 67, 67f
IRA investments in, 115f
administrators, 193f, 194, 195
liquidity, 144t, 145t
advertising and promotion, 73, 73f
net flows correlation to bond returns, 29–30, 29f
advisers, 194–95, 207, 214. See also financial advisers
net new cash flow, 15f, 24, 29–30, 29f, 146t, 149t, 150t,
aggressive growth funds, 68–69, 68f 180t, 181t
aging investors, 27, 27f, 30, 82, 83f new sales, 151t
AMPS (auction market preferred stock), 57–60, 59f, 214 number of funds, 132t, 133t, 180t
annuities, 100, 101f, 115, 115f. See also fixed annuities; number of share classes, 134t, 135t, 180t
variable annuities
number of shareholder accounts, 136t, 137t
appreciation, 214
portfolio holdings and share of total net assets, 157t
arbitrage opportunities, 44
redemptions, 153t, 155t
assets, 214
retirement assets, 119, 119f, 180t
auction market preferred stock (AMPS), 57–60, 59f, 214
tax-exempt, 201
auditors, 195, 206
total net assets, 130t, 131t, 180t, 184t
authorized participants, 214
total portfolio, common stock and other securities: purchases,
automatic reinvestment, 214 sales, and net purchases, 163t
average portfolio maturity, 214 variable annuity, 182t, 183t

224 INDEX
bond funds of funds, 172t, 173t commercial paper, 12, 12f, 170t, 171t, 215
bond index funds, 32, 32f, 33f, 174t, 175t, 176t, 177t commission, 215
bonds, 214 commodity ETFs, 41, 46, 46f, 47f, 48, 49f, 140t, 141t, 142t
directly held, 8, 10f, 13, 50, 50f, 60, 60f, 115, 115f Commodity Futures Trading Commission (CFTC), 41
returns on, 24 common stock
borrowing, 108, 207–8 as portfolio holdings, 156t, 157t
breakpoints, 215 purchases, sales, and net purchases of, 160t, 161t, 162t, 163t
break the dollar, 215 compliance programs, 206
brokerage firms compounding, 215
discount, 66, 73, 75, 86, 86f contingent deferred sales load (CDSL), 74, 215
full-service, 66, 86, 86f corporate bonds, 12f, 13, 24, 29–30, 156t, 157t
as fund intermediaries, 13f corporate bond funds
IRA assets at, 112, 112f exchange redemptions, 154t
broker-dealers, 58, 195, 215 exchange sales, 152t
Build America Bonds program, 30 liquidity, 145t
bull market, 215 net new cash flow, 150t
business corporation assets, 185t, 186t new sales, 151t
number of funds, 133t
C number of share classes, 135t
capital appreciation equity funds
number of shareholder accounts, 137t
exchange redemptions, 154t
redemptions, 153t
exchange sales, 152t
total net assets, 131t
liquidity, 145t
corporate notes, 170t, 171t
net new cash flow, 150t
cost basis, 201
new sales, 151t
Coverdell Education Savings Accounts (ESAs), 120–23, 123f, 216
number of funds, 133t
creation units, 42, 43f, 216
number of share classes, 135t
credit risk, 216
number of shareholder accounts, 137t
credit spread, 216
redemptions, 153t
custodians, 193f, 208–9, 216
total net assets, 131t
capital gains distributions, 8, 159t, 198, 200f, 215 D
catch-up contributions, 215 default, 216
CDSL (contingent deferred sales load), 74, 215 defined benefit (DB) plans, 101f, 102, 102f, 216
certificates of deposit (CDs), 115f, 170t, 171t, 215 defined contribution (DC) plans, 216. See also 401(k) plans;
CFTC (Commodity Futures Trading Commission), 41 403(b) plans; 457 plans
Class A, B, or C shares. See share classes assets, 101f, 102–4, 104f
closed-end funds, 215 closed-end fund shareholder ownership of, 61f
auction market preferred stock (AMPS), 57–60, 59f distributions from, 108–9, 109f
bond funds, 52f, 55, 55f, 56, 56f, 57, 57f, 138t, 139t ETF shareholder ownership of, 50, 51f
common shares, 57, 58f household ownership of, 9, 102–3, 102f, 103f, 118f
definition and overview, 53, 192 Internet access with household ownership of, 92–94,
92f, 93f, 94f
disclosure and transparency, 202n3
lifestyle funds in, 120, 121f
domestic bond, 56, 56f
mutual fund assets, 9, 11f, 84, 85, 118, 118f, 119, 119f
domestic equity, 55f, 56, 56f, 138t, 139t
mutual fund purchases through, 85, 85f, 86, 86f
equity funds, 55, 55f, 56, 56f, 57f, 138t, 139t
overview, 103–4
investments by, 54
target date funds in, 120, 121f
investor characteristics, 60–61, 60f, 61f
demographics of 401(k) plan participants, 105–6, 105f
issuance, 8, 54, 56, 56f, 138t
age and investment risk, 27, 27f, 30
leveraging by, 54, 57, 208
of closed-end fund investors, 60–61, 60f, 61f
market segments, 55f
of education savings plan owners, 123f
number of funds, 16, 16f, 56, 57f, 139t
of ETF-owning households, 50, 50f, 51f
preferred shares, 57–60, 58f
Internet usage by shareholders, 92–94, 92f, 93f, 94f
pricing, 54, 203
of IRA investors, 115, 115f
taxable bond, 55f, 59, 138t, 139t
of mutual fund shareholders, 80, 81f, 82–84, 83f, 84f, 92f
tax-exempt, 55f, 56, 59, 60
of retirement plan owners, 102–3, 103f
total net assets, 9f, 54–56, 55f, 58f, 138t
savings goals of mutual fund investors, 84, 84f

INDEX 225
depreciation, 216 European economic recovery, 24
disclosure, 202–3 exchange privilege, 217
discount brokers, 66, 73, 75, 86, 86f exchange-traded funds (ETFs), 217
distributions, 216 actively managed, 40, 42, 48, 140t, 141t, 142t
dividend/capital gains, 8, 158t, 159t, 169t, 198–200, arbitrage opportunities, 44
199f, 200f assets under management, 45
from retirement plans, 109, 109f, 116–17, 116f, 117f authorized participants, 42, 43f, 44
distributors, 195 broad-based equity, 46, 46f, 140t, 141t, 142t
diversification, 210, 216 commodity-based, 41, 46, 46f, 47f, 48, 49f, 140t, 141t, 142t
dividends paid and reinvested, 8, 158t, 169t, 198, 199f, 201 creation of, 42, 43f, 46, 47f
dollar-cost averaging, 216 definition and overview, 40, 192
domestic bond closed-end funds, 56, 56f demand for, 45–49
domestic equity closed-end funds, 55f, 56, 56f, 138t, 139t domestic equity, 46, 46f, 47f, 140t, 141t, 142t
domestic equity ETFs, 46, 46f, 47f, 140t, 141t, 142t emerging market, 46, 47f
domestic equity index funds, 32, 32f, 33f, 174t, 175t, 176t, 177t funds of funds structure, 48, 140t, 141t, 142t
domestic equity funds, 22, 23f, 26, 72, 72f, 119, 119f global/international equity, 46, 46f, 47f, 140t, 141t, 142t
domestic municipal bond closed-end funds, 55f, 138t, 139t as hedging vehicle, 45
domestic taxable bond closed-end funds, 55f, 138t, 139t hybrid, 46, 46f, 47f, 140t, 141t, 142t
index-based, 40, 42, 140t, 141t, 142t
E institutional investor usage, 11, 42
EBRI (Employee Benefit Research Institute), 105
investment objectives, 42, 46
economic recovery, 24
IRA investments in, 115f
EDGAR (Electronic Data Gathering, Analysis, and Retrieval)
system, 202, 203 legal structure of, 41, 41f
education IRAs, 216 liquidations of, 46, 47f
Coverdell Education Savings Accounts, 120–23, 123f mutual funds compared with, 43
Section 529 plans, 96f, 120–23, 122f, 123f net issuance, 45, 45f, 46, 46f, 142t
effective load, 65 nonregistered, 41, 41f, 48, 140t, 141t, 142t
emerging markets, 24, 27 number of funds, 16, 16f, 40, 41f, 46, 47f, 141t
emerging markets ETFs, 46, 47f overview, 39
Employee Benefit Research Institute (EBRI), 105 pricing, 43, 44, 203, 204n7
Employee Retirement Income Security Act (ERISA), 112 prospectuses, 202
employer-sponsored retirement plans. See also 401(k) plans; redemption baskets, 42, 44
403(b) plans; 457 plans; defined contribution plans registered, 41, 41f, 43, 140t, 141t, 142t
assets, 100–102 regulation of, 205, 207–8, 210
household ownership of, 102, 102f, 103f sector, 46, 46f, 48, 49f, 140t, 141t, 142t
Keoghs, 86f, 103–4, 104f, 112f, 118f, 119f shareholder characteristics, 50, 50f, 51f
load discounts or waivers for, 65, 74 sponsors, 42, 48
mutual fund assets, 85, 85f, 118, 118f, 119, 119f total net assets, 8, 9f, 38f, 40–41, 41f, 46, 47f, 140t
mutual fund purchases through, 85, 85f, 86, 86f trading, 42, 43, 43f, 44
mutual fund share classes and, 74–75 transparency, 40, 44, 202
no-load fund investments, 75 ex-dividend date, 217
employment, investment industry, 17–19, 17f, 18f, 19f expense ratio, 217. See also mutual fund fees and expenses;
equities. See stock specific classification, such as hybrid funds
equity closed-end funds, 55, 55f, 56, 56f, 57f, 138t, 139t
equity ETFs, 46, 46f, 47f, 49f, 140t, 141t, 142t
F
face value, 217
equity funds, 216. See also stock (equity) funds
fair value, 217
equity funds of funds, 172t, 173t
family of funds, 217
equity index funds
federal funds, 217
demand for, 32, 32f, 33, 33f
federal funds rate, 24
expenses and net new cash flow, 67, 67f
federal government employee retirement plans, 101f, 102
new sales and exchange sales, 176t
Federal Reserve, 24, 30
number of funds and share classes, 175t
financial advisers
redemptions and exchange redemptions, 177t
asset-based fees, 66
total net assets and net new cash flow, 174t
distribution structure and, 73–77, 73f, 75f, 76f
ERISA (Employee Retirement Income Security Act), 112
as intermediaries, 13–16, 13f, 72
Eurodollar CDs, 170t, 171t
as sources for fund ownership, 86, 86f, 87, 87f

226 INDEX
Financial Industry Regulatory Authority (FINRA), 205, 206, 217 household financial assets. See also demographics; mutual
financial institution assets, 95, 96f, 185t, 186t fund shareholders
fixed annuities, 50, 50f, 60, 60f, 115f asset location, 85–88, 85f, 86f
fixed-income funds. See bond funds by asset type, 9f
fixed-income securities, 30 bonds directly held, 8–9
forward pricing, 204, 217 capital gains distributions, 200f
front-end load, 218 closed-end funds, 9f, 60–61, 60f, 61f
front-end load funds, 65, 65f, 73–77, 76f, 77f dividend distributions, 198, 199f
full-service brokerage firms, 66, 86, 86f ETFs, 9f, 50, 50f, 51f
funds of funds, 30–31, 31f, 172t, 173t, 218 first purchases, 81f, 85, 85f
ETF funds of funds, 48, 140t, 141t, 142t index funds, 32
fund sponsors, 14–15, 14f, 15f, 22–24, 194 Internet access and, 92–94, 92f, 93f, 94f
fund supermarkets, 66, 75, 218 investment company investments, 8–9, 10f
investments, 66, 75, 78f, 80, 80f, 96f
G investor savings goals, 84, 85
GICs (guaranteed investment contracts), 105–6, 105f money market funds, 96f, 118, 118f
global/international bond closed-end funds, 55f, 56, 56f, municipal bond holdings, 13
138t, 139t
net investments in funds, bonds, and stock, 10f
global/international equity closed-end funds, 55f, 56, 56f,
purchase sources, 86f, 87
138t, 139t
in retirement accounts, 9, 11f, 102–3, 102f, 103f, 118,
global/international equity ETFs, 46, 46f, 47f, 140t, 141t, 142t
118f, 119f
global/international equity index funds, 32, 32f, 33f, 174t, 175t,
risk tolerance and, 27, 27f, 30, 89–91, 89f, 90f, 91f
176t, 177t
stocks directly held, 8–9, 10f, 50, 50f, 60, 60f, 115, 115f
global/international equity funds, 23f, 27, 68, 68f, 119, 119f
taxable accounts, 9
government agency security holdings, 12f, 13, 170t, 171t
unit investment trusts, 9f
government bond funds
HSAs (health savings accounts), 218
exchange redemptions, 154t
hybrid ETFs, 46, 46f, 47f, 140t, 141t, 142t
exchange sales, 152t
hybrid funds, 218
liquidity, 145t
capital gains paid and reinvested, 159t
net new cash flow, 150t
closed-end fund shareholder ownership of, 60, 60f
new sales, 151t
demand for, 8, 22, 30
number of funds, 133t
dividends paid and reinvested, 158t
number of share classes, 135t
ETF shareholder ownership of, 50, 50f
number of shareholder accounts, 137t
exchange redemptions, 154t
redemptions, 153t
exchange sales, 152t
total net assets, 131t
expense ratios, 64f, 66, 66f, 67f, 68f
government bonds as portfolio holdings, 156t, 157t
household ownership of, 96f
government employee retirement plans, 101f, 102
individual accounts, 184t
government money market funds, 13, 36, 36f, 164t, 165t, 166t,
167t, 170t institutional accounts, 96f, 184t, 185t
growth and income funds, 68f IRA investments in, 115f
growth funds, 68, 68f lifestyle (target risk), 31, 120, 121f, 178t, 179t
guaranteed investment contracts (GICs), 105–6, 105f liquidity, 144t, 145t
net new cash flow, 15f, 30, 67f, 146t, 148t, 150t, 180t, 181t
H new sales, 151t
hedge funds, 218 number of funds, 132t, 133t, 180t
Herfindahl-Hirschman Index, 22–23 number of share classes, 134t, 135t, 180t
high-yield bond funds number of shareholder accounts, 136t, 137t
exchange redemptions, 154t portfolio holdings and share of total net assets, 157t
exchange sales, 152t redemptions, 153t, 155t
liquidity, 145t retirement assets, 119, 119f
net new cash flow, 150t retirement mutual funds, 180t
new sales, 151t total net assets, 130t, 131t, 180t, 184t
number of funds, 133t total portfolio, common stock and other securities: purchases,
number of share classes, 135t sales, and net purchases, 162t
number of shareholder accounts, 137t variable annuity, 182t, 183t
redemptions, 153t hybrid funds of funds, 31, 172t, 173t
total net assets, 131t hybrid index funds, 32f, 33f, 174t, 175t, 176t, 177t

INDEX 227
I institutional money market funds (continued)
income distributions, 218 tax-exempt, 166t, 167t
independent directors, 194, 206, 218 total net assets, 36f, 166t, 184t, 185t, 186t
independent fund advisers, 13f U.S. business short-term assets, 37f
independent public accountants, 193f insurance agents or companies, 13f, 86, 86f, 95
index ETFs, 40, 42, 140t, 141t, 142t interest rate risk, 218
index funds, 218 interest rates, 29, 30, 34, 35f
demand for, 32–33, 32f, 33f intermediaries, 13, 13f, 72, 73, 73f
domestic equity, 32, 32f, 33f, 174t, 175t, 176t, 177t international bond funds. See global/international bond
net new cash flow, 174t closed-end funds
new sales and exchange sales, 176t international equity funds. See global/international equity
entries
number of funds, 175t
Internet usage by mutual fund shareholders, 92–94, 92f, 93f, 94f
number of share classes, 175t
Intraday Indicative Value (IIV), 44, 218
redemptions and exchange redemptions, 177t
investment advisers, 193f, 195, 207, 218. See also financial
S&P 500, 33, 33f, 70–71, 70f, 71f, 174t, 175t, 176t, 177t
advisers
total net assets, 174t
Investment Advisers Act of 1940, 191
individual investors, 95, 184t, 186t. See also household
investment club assets, 95
financial assets
investment companies, 218. See also closed-end funds;
individual retirement accounts (IRAs), 218
exchange-traded funds; mutual fund entries; regulation
assets, 100–102, 101f, 112–13, 112f, 115, 115f of investment companies; unit investment trusts
closed-end fund shareholder ownership of, 61f employment, 17–19, 17f, 18f, 19f
contributions to, 113 history, 211–13
DC plan distributions as rollovers, 109, 109f household investments in, 8–9, 10f
distributions from, 116–17, 116f, 117f industry statistics, 231f
ETF shareholder ownership of, 51f investor reliance on, 8–11
household ownership of, 9, 102–3, 102f, 103f, 113­–115, 113f municipal bond holdings, 13
investor demographics, 84, 84f, 115 new cash flow, 14, 15f
in lifestyle funds, 120, 121f number of, 13–16, 16f
in money market funds, 84 number of fund sponsors, 14–15, 14f, 15f
mutual fund assets, 9, 11f, 85, 85f, 112, 112f, 118, 118f, 119, pooled investing origins, 190–91
119f, 120, 121f
roles, 12–13
mutual fund market share, 112, 112f
total market securities held, 12–13, 12f
overview, 112
total net assets by type, 8, 9f
rollovers, 114, 114f
types of, 13–16, 13f, 16f, 192
Roth IRAs, 102f, 112–13, 113f
U.S. corporate equity share, 6f, 12f
SAR-SEP IRA, 85f, 86f, 102f, 113, 113f
Investment Company Act of 1940
SEP IRA, 85f, 86f, 113, 113f
ETF regulation under, 40, 41, 41f
SIMPLE IRA, 85f, 86f, 102f, 113, 113f
mutual fund operations, 191, 194
in target date funds, 120, 121f
regulatory requirements, 204, 206, 207–8, 209, 210
individual stock. See stock: directly held
Rule 12b-1 adoption, 73
inflation risk, 218
investment objectives, 219
initial public offering (IPO), 218
investment risk, 27, 27f, 30
institutional investors, 218
IPO (initial public offering), 218
ETF investments by, 11, 45
IRAs. See individual retirement accounts
long-term mutual fund assets, 95, 96f
issuers, 219
mutual fund expense ratio and account balances, 69
net new cash flow, no-load funds, 76f K
nonfinancial business assets, 37, 37f, 95, 96f Keoghs, 86f, 103–4, 104f, 112f, 118f, 119f, 219
total net assets, 184t, 185t, 186t
total net assets, no-load funds, 77f L
large-cap equity portfolios, 46, 47f, 69, 70
institutional money market funds
level-load funds, 74, 76f, 77f
demand for, 24, 36–37, 36f, 37f
leveraging, 54, 57, 207–8
government, 166t, 167t
lifecycle funds. See target date funds
net new cash flow, 34f, 36, 36f, 167t
life insurance company IRA assets, 112, 112f
non-government, 166t, 167t
lifestyle (target risk) funds, 31, 120, 121f, 178t, 179t, 219
ownership, 95, 96f
liquid assets as portfolio holdings, 156t, 157t

228 INDEX
liquidity, 144t, 145t, 219 MuniFund Term Preferred (MTP) shares, 59, 219
load (sales charge), 64–66, 74, 219 mutual fund, 220
load funds, 65, 65f, 70, 70f, 71f, 73–76, 75f, 76f, 77f, 219 mutual fund characteristics
local government employee retirement plans, 101f, 102 creation of, 194
long-term mutual funds, 219. See also bond funds; hybrid funds; custody, 208–9
index funds; mutual fund entries; stock (equity) funds definition and overview, 192
demand for, 26–33 disclosure and transparency, 202–3
fund size and account balance, 69, 69f diversification, 210
household ownership of, 84, 96f ETFs compared with, 43
IRA assets in, 115, 115f, 118, 118f history, 190–91, 211–13
net new cash flow, 8, 24, 26, 76, 76f legislation governing, 191
retirement assets in, 84, 118, 118f leverage limits, 207–8
total net assets, 77f liquidity requirements, 205
long-term U.S. government bonds, 156t, 157t net asset value, 43, 192, 204
organizational structure, 192–95
M oversight and accountability, 205–7
management fees, 219
pricing, 43, 192, 203–5
market value, 219
prohibited transactions, 209
maturity, 219
share classes, 74–75
mid-cap equity portfolios, 47f, 69
tax features, 196–201
money market, 219
trading, 43, 201
money market funds, 219. See also institutional money
market funds valuation and liquidity, 203–5
401(k) asset allocation, 105–6, 105f mutual fund companies, 86, 86f, 87, 88f, 89, 89f
asset composition of, 170t, 171t mutual fund complexes, 13, 13f, 15f, 22–24, 23f
closed-end fund shareholder ownership of, 60, 60f mutual fund data. See also bond funds; exchange-traded funds;
hybrid funds; money market funds; retirement mutual
demand for, 22, 34–37, 34f, 35f, 36f, 37f
funds; stock (equity) funds
dividends paid and reinvested, 169t, 199f
assets, 8, 69
ETF shareholder ownership of, 50, 50f
assets at larger complexes, 22–24
expense ratios, 68, 68f
capital gains paid and reinvested, 8, 159t, 198, 200f
government, 13, 36, 36f, 164t, 165t, 166t, 167t, 170t
closed-end fund shareholder ownership of mutual funds,
household ownership of, 96f 60, 60f
household savings goals and, 84 commercial paper holdings, 12, 12f
individual accounts, 184t corporate bond holdings, 12f, 13
investor shift to bond funds from, 29 dividends paid and reinvested, 8, 158t, 198, 199f
liquidity requirements, 205n10 education savings plan investments, 120–23, 123f
net new cash flow, 24, 34, 34f, 35f, 167t, 168t, 180t, 181t exchange redemptions, 129t, 154t
nonfinancial business holdings, 11 exchange sales, 129t, 152t
non-government, 36, 36f, 164t, 165t, 166t, 167t, 171t fund size and account balance, 69f
number of funds, 132t, 133t, 165t, 180t funds leaving or entering industry, 15f
number of share classes, 134t, 135t, 165t, 180t household taxable accounts, 9
number of shareholder accounts, 136t, 137t, 164t individual accounts, 184t
retail, 34–35, 34f, 35f, 166t, 167t institutional accounts, 166t, 184t, 185t, 186t
retirement assets, 84, 115f, 118, 118f, 119, 119f, 180t liquidated funds, 15, 15f
taxable, 164t, 165t, 166t, 167t liquidity, 144t, 145t
tax-exempt, 164t, 165t, 166t, 167t merged funds, 15, 15f
total net assets, 8, 130t, 131t, 164t, 166t, 180t, 184t net new cash flow, 15f, 24, 25f, 26, 146t, 150t
variable annuity, 182t, 183t new funds, 15, 15f
yields, 34, 35f new sales, 8, 129t, 151t
Morgan Stanley Capital International (MSCI) world indexes, no-load share classes, 76f, 77f
26n2, 27
number of funds, 16, 16f, 128t, 132t, 133t
Morningstar, 203
number of funds leaving or entering industry, 15
MTP (MuniFund Term Preferred) shares, 59, 219
number of share classes, 128t, 134t, 135t, 165t, 180t
municipal bond, 12f, 13, 30, 156t, 157t
number of shareholder accounts, 66, 128t, 136t, 137t
municipal bond closed-end funds, 55f, 56, 59, 60
number of sponsors, 15
municipal bond funds, 68f, 201. See also national municipal
portfolio holdings and share of total net assets, 156t, 157t
bond funds; state municipal bond funds
redemptions, 129t, 153t, 155t

INDEX 229
mutual fund data (continued) N
tax-exempt funds, 13, 201 NASDAQ Composite Index, 26
total net assets, 9f, 77f, 128t, 130f, 131t, 184t national municipal bond funds
total portfolio, common stock and other securities: purchases, exchange redemptions, 154t
sales, and net purchases, 160t exchange sales, 152t
total sales, 129t liquidity, 145t
U.S. corporate equity holdings, 6f, 12f net new cash flow, 150t
U.S. municipal security holdings, 12f, 13 new sales, 151t
U.S. Treasury and government agency security holdings, number of funds, 133t
12f, 13
number of share classes, 135t
mutual fund fees and expenses
number of shareholder accounts, 137t
12b-1 fees, 72–75, 73f, 75f
redemptions, 153t
in 401(k) plans, 109–11, 111f
total net assets, 131t
distribution structure changes, 73–77
net asset value (NAV), 43, 192, 204, 220
downward trend of, 62, 64–67, 64f, 65f, 66f, 67f
net new cash flow, 220. See also specific classification, such
expense ratios, 64, 64f, 66–67, 66f as bond funds
expense ratios and fund size, 69–72, 72f no-load funds, 66, 70–71, 72, 74, 75, 75f, 76, 76f, 77f, 220
expense ratios by investment objective, 68–69, 68f nonfinancial business assets, 11, 37, 37f, 95, 96f
factors influencing, 68–72 non-government money market funds, 36, 36f, 164t, 165t,
fund size and account balances, 69, 69f 166t, 167t, 171t
overview, 63 nonprofit organization assets, 95, 96f, 185t, 186t
share classes, 74–75 non-U.S. fund advisers, 13f
of S&P 500 index funds, 70–71, 70f, 71f number of funds. See mutual fund data; specific classification,
trends, 64–66 such as hybrid funds
mutual fund retirement accounts. See retirement mutual funds
O
mutual fund shareholders. See also demographics; specific
open-end investment companies, 192, 220. See also mutual
classification, such as bond funds
fund entries
asset location, 85–88, 85f, 86f
operating expenses, 220
average age of account, 88, 88f
organization of mutual funds, 192–95, 193f
average tenure with fund companies, 88, 88f
financial adviser contact, 87–88, 87f P
first fund purchases, 81f, 85, 85f payroll deduction plans, 220
institutional owners, 95–96, 96f Pension Protection Act (PPA), 120
lower cost demands by, 66–67, 66f, 76, 76f pooled investing, 190–91, 220
median fund investment, 80 portfolio, 220
overview, 79, 81f portfolio manager, 220
purchase sources, 87, 87f portfolio turnover, 28, 28f, 220
risk tolerance, 27, 27f, 30, 89–91, 89f, 90f, 91f preferred stock, 57–60, 156t, 157t
savings goals of, 84–85 prepayment risk, 220
shareholder sentiment, 89–91, 89f, 90f, 91f principal, 220
voting rights, 194 principal underwriters, 193f, 195
mutual fund supermarkets, 66, 75, 218 profit sharing plans, 104f
mutual funds worldwide, 22, 23f, 26f, 187t, 188t, 189t prospectus, 202, 220
mutual fund trends puttable preferred stock, 59–60, 221
bond funds, 22, 29–30, 29f
equity funds, 20f, 22, 26–27 Q
quality, 221
fees and expenses, 64–66
funds of funds, 31, 31f R
hybrid funds, 8, 22, 30 real estate investments, 50, 50f, 60, 60f
index funds, 32–33, 32f, 33f rebalancing, 31
money market funds, 22, 34–37, 34f, 35f, 36f, 37f redeem, 221
net flows, 24, 25f, 26f redemption price, 221
overview, 21 registered investment companies. See investment companies
U.S. assets, 22–24 registration statements, 202
regulated investment companies (RICs), 196, 198, 210

230 INDEX
regulation of investment companies senior securities, 207
custody, 208–9 SEP IRA (simplified employee pension plan), 85f, 86f, 102f,
daily valuation and liquidity, 203–5 113, 113f, 222
diversification, 210 series funds, 222
leverage limits, 207–8 share classes, 74–75, 128t, 134t, 135t, 165t, 180t, 222
oversight and accountability, 205–7 shareholder accounts, 66, 128t, 136t, 137t, 164t
prohibited transactions, 209 shareholders, 193f, 194, 201, 222. See also mutual fund
shareholders
transparency, 202–3
shareholder sentiment, 89–91, 89f, 90f, 91f
reinvestment privilege, 221
shareholder services, 73, 73f
repurchase agreements, 170t, 171t, 221
short-term funds, 222
required minimum distributions (RMDs), 116, 221
SIMPLE IRA (savings incentive match plan for employees),
research publications, xii–xiv
85f, 86f, 102f, 112–13, 113f, 222
retail investors, 69, 71, 76, 77
simplified employee pension plan (SAR-SEP IRA), 85f, 86f,
retail money market funds, 34–35, 34f, 35f, 166t, 167t 102f, 113, 113f, 221
retirement mutual funds. See also 401(k) plans; defined small-cap equity portfolios, 47f, 69
contribution (DC) plans; individual retirement accounts;
Social Security benefits, 100, 100f
specific classification, such as bond funds
S&P 500 index, 33, 33f, 89–90, 89f, 90f, 222
assets, 9, 11f, 84, 112–13, 112f, 118, 118f, 119, 119f
S&P 500 index funds, 33, 33f, 70–71, 70f, 71f, 174t, 175t,
household accounts, 9, 11f, 102–3, 102f, 103f, 118, 118f, 119f
176t, 177t
IRA investments, by type, 115, 115f
sponsors, 14f, 193f, 194
IRA market share, 112, 112f
stable value funds, 105–6, 105f
lifestyle funds, 120, 121f
Standard & Poor’s 500 index, 33, 33f, 89–90, 89f, 90f, 222
market share, 118
state government employee retirement plans, 101f, 102
money market funds, 84, 115f, 118, 118f, 119, 119f, 180t
statement of additional information (SAI), 202, 222
net new cash flow, 180t, 181t
state municipal bond funds
number of funds, 180t
exchange redemptions, 154t
number of share classes, 180t
exchange sales, 152t
retirement assets, 119, 119f
liquidity, 145t
target date funds, 120, 121f
net new cash flow, 150t
total net assets, 180t
new sales, 151t
retirement plans. See defined benefit plans; defined contribution
number of funds, 133t
plans; employer-sponsored retirement plans; individual
retirement accounts number of share classes, 135t
RICs (regulated investment companies), 196, 198, 210 number of shareholder accounts, 137t
risk management, 31 redemptions, 153t
risk/return tradeoff, 221 total net assets, 131t
risk tolerance, 27, 27f, 30, 89–90, 89f, 90f, 91f stock (equities), 222
RMDs (required minimum distributions), 116, 221 401(k) asset allocation, 106, 106f
rollover, 221 company, 105–6, 105f
Roth IRAs, 102f, 113, 113f, 221 directly held, 8, 10f, 50, 50f, 60, 60f, 115, 115f
held by investment companies, 12f
S as portfolio holdings, 156t, 157t
SAI (statement of additional information), 202, 222 price performance, 8, 24, 26, 26f, 89–90, 89f, 90f
sales charges (load), 64–66, 74, 221 stock bonus plans, 104f
Sarbanes-Oxley Act, 207 stock (equity) funds, 222. See also capital appreciation
SAR-SEP IRA (salary reduction simplified employee pension equity funds; global/international equity entries
plan), 85f, 86f, 102f, 113, 113f, 221 401(k) asset allocation, 105–6, 105f
secondary market, 221 capital gains paid and reinvested, 159t
Section 529 plans, 96f, 120–23, 122f, 123f, 217 closed-end fund shareholder ownership of, 60, 60f
sector ETFs, 46, 46f, 48, 49f, 140t, 141t, 142t closed-end proceeds from issuance by fund type, 138t
sector funds, 68, 68f closed-end total net assets, 138t
Securities Act of 1933, 41, 191, 194 demand for, 20f, 22, 26–27
Securities and Exchange Commission (SEC), 40–41, 73, 194, dividends paid and reinvested, 158t
198, 221. See also regulation of investment companies
domestic, 22, 23f, 26, 72, 72f
Securities Exchange Act of 1934, 191, 195
ETF shareholder ownership of, 50, 50f
securitization, 221
exchange redemptions, 154t
semiannual reports, 222
exchange sales, 152t

INDEX 231
stock (equity) funds (continued) taxable money market funds (continued)
expense ratios, 64–65, 64f, 65f, 66–67, 66f, 67f, 68, 68f number of funds, 133t
household ownership of, 8, 96f number of share classes, 135t, 165t
individual accounts, 184t number of shareholder accounts, 137t, 164t
institutional accounts, 96f, 184t, 185t total net assets, 131t, 164t, 166t, 186t
international assets, with, 8 tax-deferred mutual funds, 84, 197f
IRA assets in, 115, 115f tax-exempt bond closed-end funds, 55f, 56, 59, 60
liquidity, 144t, 145t tax-exempt money market funds
net new cash flow, 15f, 26–28, 26f, 67, 67f, 146t, 147t, dividends paid and reinvested, 169t
150t, 180t, 181t net new cash flow, 167t
new sales, 151t number of funds, 133t, 165t
number of funds, 132t, 133t, 180t number of share classes, 135t, 165t
number of share classes, 134t, 135t, 180t number of shareholder accounts, 137t, 164t
number of shareholder accounts, 136t, 137t total net assets, 131t, 164t, 166t
portfolio holdings and share of total net assets, 157t tax-exempt mutual funds, 13, 199f, 200f, 201
redemptions, 153t, 155t tax features of mutual funds, 196–201
retirement assets, 119, 119f Thrift Savings Plan, 101f, 102
retirement mutual funds, 180t total net assets, 222. See also mutual fund data; specific
sector funds, 68, 68f classification, such as closed-end funds
stock price performance and net flow, 26, 26f total return, 223
total net assets, 130t, 131t, 180t, 184t total return equity funds
total portfolio, common stock, and other securities: exchange redemptions, 154t
purchases, sales, and net purchases, 161t exchange sales, 152t
turnover rate, 28, 28f liquidity, 145t
variable annuity, 182t, 183t net new cash flow, 150t
strategic income bond funds new sales, 151t
exchange redemptions, 154t number of funds, 133t
exchange sales, 152t number of share classes, 135t
liquidity, 145t number of shareholder accounts, 137t
net new cash flow, 150t redemptions, 153t
new sales, 151t total net assets, 131t
number of funds, 133t traditional IRAs, 223. See also individual retirement accounts
number of share classes, 135t transfer agents, 193f, 195, 223
number of shareholder accounts, 137t transparency, 202–3
redemptions, 153t Treasury bill (T-bill), 223
total net assets, 131t Treasury securities, 12f, 13, 24, 170t, 171t
summary prospectus, 202, 222 turnover rate, 28, 28f, 110

T U
target date (lifecycle) funds, 219, 222 underwriters, 73, 73f, 195, 223
in 401(k) plans, 105–7, 105f, 106–7, 107f unit investment trusts (UITs), 8, 9f, 16, 16f, 143t, 192,
assets, 120, 121f 202n3, 223
expense ratios, 67, 67f U.S. government agency issues, 12f, 13, 170t, 171t
net new cash flow, 67, 67f, 179t U.S. government bond funds. See government bond funds
overview, 31, 106–7, 107f, 120, 121f U.S. government bonds as portfolio holdings, 156t, 157t
total net assets, net new cash flow, number of funds, U.S. government money market funds. See government money
share classes, 178t market funds
target risk (lifestyle) funds, 222. See also lifestyle funds U.S. mutual fund assets. See mutual fund data
taxable bond closed-end funds, 55f, 59, 138t, 139t U.S. retirement system, 100–103, 101f
taxable capital gains distributions, 198, 200f U.S. savings bonds, 115f
taxable dividend distributions, 198, 199f U.S. Securities and Exchange Commission (SEC), 40–41, 73,
taxable money market funds 194, 198, 223
asset composition, 170t, 171t U.S. Treasury securities, 12f, 13, 24, 170t, 171t
dividends paid and reinvested, 169t
government, 170t
V
variable annuities, 50, 50f, 60, 60f, 76, 76f, 77f, 96f, 115f,
institutional investors, 166t, 186t 118f, 223
non-government, 171t variable annuity funds, 182t, 183t
Variable Rate Demand Preferred (VRDP) shares, 59, 60, 223

232 INDEX
W
Wilshire 5000 Total Market Index, 24
withdrawal plans, 223
world bond funds
exchange redemptions, 154t
exchange sales, 152t
liquidity, 145t
net new cash flow, 150t
new sales, 151t
number of funds, 133t
number of share classes, 135t
number of shareholder accounts, 137t
redemptions, 153t
total net assets, 131t
world equity funds
exchange redemptions, 154t
exchange sales, 152t
liquidity, 145t
net new cash flow, 150t
new sales, 151t
number of funds, 133t
number of share classes, 135t
number of shareholder accounts, 137t
redemptions, 153t
total net assets, 131t
worldwide mutual fund data, 22, 23f, 26f, 187t, 188t, 189t

Y
yield, 223

INDEX 233
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