2016 Investment Company Fact Book - Investment Company Institute [PDF]

A Review of Trends and Activities in the U.S. Investment Company Industry 56th edition WWW.ICIFACTBOOK.ORG

2015 Facts at a Glance Total worldwide assets invested in regulated open-end funds*

$37.2 trillion

U.S. investment company total net assets

$18.1 trillion

Mutual funds

$15.7 trillion

Exchange-traded funds

$2.1 trillion

Closed-end funds

$261 billion

Unit investment trusts

$94 billion

U.S. investment companies’ share of: U.S. corporate equity

31%

U.S. municipal securities

26%

Commercial paper

40%

U.S. government securities

11%

U.S. household ownership of funds Number of households owning funds†

54.9 million

Number of individuals owning funds†

93.1 million

Percentage of households owning funds†

44.1%

Median mutual fund assets of mutual fund–owning households

$120,000

Median number of mutual funds owned

3

U.S. retirement market Total retirement market assets

$24.0 trillion

Percentage of households with tax-advantaged retirement savings

60%

IRA and DC plan assets invested in mutual funds U.S. investment company industry employment

$7.1 trillion 174,000 employees

* Regulated open-end funds include mutual funds, exchange-traded funds (ETFs), and institutional funds. † This category represents registered investment companies.

A Review of Trends and Activities in the U.S. Investment Company Industry 56th edition 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 is 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-sixth edition ISBN 1-878731-61-0 Copyright © 2016 by the Investment Company Institute. All rights reserved.

CONTENTS Letter from the Chief Economist .

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ICI Research Staff and Publications .

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PART 1: ANALYSIS AND STATISTICS List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Chapter 1: U.S.-Registered Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Chapter 2: Recent Mutual Fund Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Chapter 3: Exchange-Traded Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Chapter 4: Closed-End Funds .

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Chapter 5: Mutual Fund Expenses and Fees .

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Chapter 6: Characteristics of Mutual Fund Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Chapter 7: Retirement and Education Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

PART 2: DATA TABLES List of Data Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Section 1: Mutual Fund Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Section 2: Closed-End Funds, Exchange-Traded Funds, and Unit Investment Trusts . . . . . . . . . 180 Section 3: Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Section 4: Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Section 5: Additional Categories of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 Section 6: Institutional Investors in Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Section 7: Retirement Account Investing in Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Section 8: Worldwide Regulated Open-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Appendix A: How U.S.-Registered Investment Companies Operate and the Core Principles Underlying Their Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 Appendix B: Significant Events in Fund History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285

LETTER FROM THE

Chief Economist

LETTER FROM CHIEF ECONOMIST BRIAN REID Recently, I was thinking about a question you may have asked: whether it is more fuel efficient to cool a car during a drive by running its air conditioner or by rolling its windows down and leaving the air conditioner off. The answer, just like many things in life, isn’t a simple one. It depends on the car’s speed and its design: the faster you’re driving, or the more aerodynamic your car, the better off you are rolling up the windows and using the air conditioner. At ICI, we are often asked questions about complex topics that don’t have simple answers. President Harry Truman’s famous quip about wanting a “one-handed” economist (“All my economists say, ‘On the one hand…on the other hand’”) sometimes crosses my mind. And yet, Truman’s two-handed economists were doing their jobs when answering questions about complex topics. We live in a complicated world. Although we strive for one-handed answers when possible, it’s not always what our world allows. Sometimes simple answers can be fundamentally wrong and lead to public policies that can do more harm than good. At ICI, we are fortunate to work for an organization whose members support careful, comprehensive, evidence-based analysis of complex public policy issues. This winter, ICI published a book authored by one of my colleagues, Peter Brady. How America Supports Retirement tackles a complex topic through substantive, painstaking work. Peter challenges the conventional wisdom about who benefits from tax deferral and Social Security, two mechanisms that the federal government uses to help Americans prepare for retirement. As he points out, the combined effect of these two programs is poorly understood, leading to the false notion of an “upside-down” retirement system that benefits only the wealthy. Discussions of retirement policy often ignore the substantial benefits that Social Security provides to households with low and moderate lifetime incomes. These discussions also focus on the reduction in taxes from tax deferral while ignoring the higher taxes workers will pay in retirement when they draw down their savings or receive income from a defined benefit plan. Peter’s innovative work illustrates that “evaluated as a whole, the U.S. retirement system is progressive,” with lifetime benefits proportionately higher for workers with lower lifetime earnings.

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Why is this holistic approach important? Because “who benefits from the retirement system?” is a complex question, and simple answers can lead to harmful policies. As Peter explains, recent tax proposals could actually make the system less fair. For example, several prominent proposals would further limit employee contributions to retirement plans or change the tax treatment of these contributions. Such changes would disadvantage private-sector workers— who rely more on defined contribution plans than do public-sector workers—as well as workers who save on their own in an IRA or whose employers do not make contributions to their retirement plans. In another line of substantive ICI research, my colleague Shelly Antoniewicz has shown that the risks of using derivatives are often misunderstood. As she points out, one common misperception is that “funds that use derivatives are leveraged, and therefore are riskier than funds that don’t use derivatives.” But a fund’s use of derivatives does not necessarily translate into leverage. Leverage is a measure of how a fund increases or amplifies the gains or losses that its shareholders are exposed to. As Shelly concludes, a fund that makes greater use of derivatives may be “more risky, less risky, or equally risky as a fund that has no exposure to derivatives.” In addition, derivatives have many benefits for funds and their investors, including hedging risk, enhancing liquidity, managing cash, or gaining or reducing exposure to certain markets or asset classes. Such activities may be more difficult, or costly, or even impossible to execute with direct holdings of securities alone. Therefore, a fund’s total exposure to derivatives does not provide a very useful measure of its risks. Indeed, such a simple measure of risk could lead policymakers, regulators, and investors astray. These two examples of ICI analysis are good reminders that in a complex world, simple answers don’t always work. At times the dialogue may frustrate policymakers who want a quick and simple solution, but an informed conversation among legislators, regulators, and stakeholders is necessary to understand the nuances and intricacies of a problem and its solutions. It is our job as economists to use our comprehensive analysis to find answers to questions and to help avoid harmful outcomes. The 56th Investment Company Fact Book is yet another ICI contribution to a discussion that leads to better public policies that affect funds, their investors, and financial markets. I hope that it helps you in your quest to find comprehensive, evidence-based analysis to address today’s vexing policy questions. Thank you for your continued interest in our research and publications.

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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 international financial markets, and the retirement market. Before 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. SENIOR DIRECTOR OF INDUSTRY AND FINANCIAL ANALYSIS Sean Collins 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 research on the flows, assets, and fees of mutual funds, as well as a research initiative to better understand the costs and benefits of laws and regulations governing mutual funds. Before joining ICI, Collins was an 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. SENIOR DIRECTOR OF RETIREMENT AND INVESTOR RESEARCH Sarah Holden leads the Institute’s research efforts on investor demographics and behavior and retirement and tax policy. Holden, who joined ICI in 1999, heads efforts to track trends in household retirement saving activity and ownership of funds as well as other investments inside and outside retirement accounts. Before 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. SENIOR DIRECTOR OF STATISTICAL RESEARCH Judy Steenstra oversees the collection and publication of weekly, monthly, quarterly, and annual data on open-end mutual funds, as well as data on closedend funds, exchange-traded funds, unit investment trusts, and the worldwide 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.

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ICI Research Department The ICI Research Department consists of 39 members, including economists and research analysts. This staff collects and disseminates 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.

2015 ICI Research and Statistical Publications ICI is the primary source of analysis and statistical information on the investment company industry. In 2015, the Institute’s Research Department released more than 180 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 released 20 research and policy publications in 2015, examining the industry and its shareholders.

Books In a new ICI book written in 2015, How America Supports Retirement: Challenging the Conventional Wisdom on Who Benefits, Senior Economist Peter J. Brady dispels myths about tax deferral and details how the current structure of the U.S. retirement system is progressive and provides benefits to all American workers. Brady’s innovative work was highly praised and its findings bear directly on today’s pressing policy debates. The book and related materials are available at www.ici.org/whobenefits. The Investment Company Fact Book remains one of ICI Research’s most visible products— garnering more than 38,000 visits and downloads in 2015. In its 56th edition, this ICI publication continues to provide the public and policymakers with a comprehensive summary of ICI’s data and analysis. The Fact Book is available at www.icifactbook.org in both PDF and HTML formats. The HTML version contains downloadable data for all charts and tables.

Papers INDUSTRY AND FINANCIAL ANALYSIS

»» The Role and Activities of Authorized Participants of Exchange-Traded Funds, March 2015 »» “The Closed-End Fund Market, 2014,” ICI Research Perspective, April 2015 »» “Regulated Funds, Emerging Markets, and Financial Stability,” ICI Global Research Perspective, April 2015

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INVESTOR RESEARCH

»» “American Views on Defined Contribution Plan Saving,” ICI Research Report, January 2015 »» “Profile of Mutual Fund Shareholders, 2014,” ICI Research Report, February 2015 »» “The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007–2013,” ICI Research Report, July 2015

»» “The IRA Investor Profile: Roth IRA Investors’ Activity, 2007–2013,” ICI Research Report, July 2015

»» “Characteristics of Mutual Fund Investors, 2015,” ICI Research Perspective, November 2015 »» “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015,” ICI Research Perspective, November 2015 RETIREMENT RESEARCH

»» “The Role of IRAs in U.S. Households’ Saving for Retirement, 2014,” ICI Research Perspective, January 2015

»» “Defined Contribution Plan Participants’ Activities, First Three Quarters of 2014,” ICI Research Report, February 2015

»» “Defined Contribution Plan Participants’ Activities, 2014,” ICI Research Report, April 2015 »» The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403(b) Plans, June 2015

»» “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2014,” ICI Research Perspective, August 2015

»» “Defined Contribution Plan Participants’ Activities, First Quarter 2015,” ICI Research Report, August 2015

»» “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Account Balances, 2007–2013,” ICI Research Perspective, September 2015

»» “Who Benefits from the U.S. Retirement System,” ICI Research Perspective, November 2015 »» “Defined Contribution Plan Participants’ Activities, First Half 2015,” ICI Research Report, November 2015

»» The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2013, December 2015 ICI’s papers and more are available at www.ici.org/research.

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Analysis and Commentary: ICI Viewpoints In addition to research papers, ICI staff produce analysis and commentary for the Institute’s blog, ICI Viewpoints. Below are some examples of the analysis published in 2015. Please visit www.ici.org/viewpoints to find these and more.

»» The Wall Street Journal’s Dangerous Disservice to Investors »» Getting the Numbers Right on Investment Advice for Retirement Savers »» The IMF Is Entitled to Its Opinion, but Not to Its Own Facts »» On Fiduciary Rule, New York Times Relies on Fatally Flawed Research »» Correcting a Distorted Picture of Retirement Resources »» The IMF on Asset Management: Which Herd to Follow? »» High-Yield Bond Mutual Fund Flows: Some Perspective »» Changes to Money Market Funds Are Showing Up in Data »» Does Liquidity in ETFs Depend Solely on Authorized Participants? »» New York Times Paints False Picture of Funds’ Emerging Market Investments »» Why Long-Term Fund Flows Aren’t a Systemic Risk: Past Is Prologue »» The IMF Quietly Changes Its Data, but Not Its Views »» The IMF on Asset Management: Handle Empirical Results with Care »» Ignore the IMF’s Uninformed Call for a Third Round of Reforms to U.S. Money Market Funds »» Federal Reserve Reverse Repo Facility Helps Stabilize Short-Term Money Markets »» Small Savers at a Loss »» Why Long-Term Fund Flows Aren’t a Systemic Risk: Multi-Sector Review Shows the Same Result

»» U.S. Bond ETFs Resilient on August 24 »» More Unfounded Speculation on Bond ETFs and Financial Stability »» High-Yield Bond ETFs: A Source of Liquidity

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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. ESTIMATED LONG-TERM MUTUAL FUND FLOWS

»» A weekly report that provides aggregate estimates of net new cash flows to equity, hybrid, and bond mutual funds. MONEY MARKET FUND ASSETS

»» A weekly report on money market fund assets by type of fund. MONTHLY TAXABLE MONEY MARKET FUND PORTFOLIO DATA

»» A monthly report based on data contained in SEC Form N-MFP that provides insights into the aggregated holdings of prime and government money market funds and the nature and maturity of security holdings and repurchase agreements. RETIREMENT MARKET DATA

»» A quarterly report that includes individual retirement account and defined contribution plan assets and mutual fund assets held in those accounts by type of fund. CLOSED-END FUND DATA

»» A quarterly report on closed-end fund assets, number of funds, issuance, and number of shareholders. EXCHANGE-TRADED FUND DATA

»» A monthly report that includes assets, number of funds, issuance, and redemptions of ETFs. UNIT INVESTMENT TRUST DATA

»» A monthly report that includes the value and number of new trust deposits by type and maturity. WORLDWIDE REGULATED OPEN-END FUND DATA

»» A quarterly report that includes assets, number of funds, and net sales of funds in countries worldwide. These and other ICI statistics are available at www.ici.org/research/stats. To subscribe to ICI’s statistical releases, visit www.ici.org/pdf/stats_subs_order.pdf.

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Acknowledgments Publication of the 2016 Investment Company Fact Book was directed by Chris Plantier, senior economist, and Judy Steenstra, senior director of statistical research, working with Miriam Bridges, editorial director, Candice Gullett, senior copyeditor, and Jodi Weakland, design director. Contributors from ICI’s research team who developed and edited analysis, text, and data are Shelly Antoniewicz, Steven Bass, Mike Bogdan, James Duvall, Emily Gallagher, Sheila McDonald, Doug Richardson, Julieth Saenz, Dan Schrass, and Erin Short.

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PART ONE

Analysis and Statistics

FIGURES Chapter 1

U.S.-REGISTERED INVESTMENT COMPANIES Figure 1.1: Investment Company Total Net Assets by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.2: The United States Has the World’s Largest Regulated Open-End Fund Market . . . . . . . . . . . . . . . . . . . . . . . . 10 1.3: Share of Household Financial Assets Held in Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.4: Household Net Investments in Funds, Bonds, and Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.5: Mutual Funds in Household Retirement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.6: Investment Companies Channel Investment to Stock, Bond, and Money Markets . . . . . . . . . . . . . . . . . . . . . . 14 1.7: More Than Three-Quarters of Fund Complexes Were Independent Fund Advisers . . . . . . . . . . . . . . . . . . . . . . 15 1.8: Number of Fund Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.9: Fund Complexes with Positive Net New Cash Flow to Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . .17 1.10: Share of Mutual Fund and ETF Assets at the Largest Fund Complexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 1.11: Number of Mutual Funds Entering and Leaving the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.12: Total Net Assets and Number of UITs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.13: Number of Investment Companies by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 1.14: Investment Company Industry Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1.15: Investment Company Industry Employment by Job Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.16: Investment Company Industry Employment by State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Chapter 2

RECENT MUTUAL FUND TRENDS

Figure 2.1: Equity Funds Held More Than Half of Total Mutual Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.2: Institutional and Household Ownership of Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.3: Net New Cash Flow to Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.4: Net New Cash Flow to Equity Funds Is Related to World Equity Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.5: Net New Cash Flow to Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.6: Turnover Rate Experienced by Equity Fund Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.7: Net New Cash Flow to Bond Funds Is Related to Bond Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.8: Modest Outflows from High-Yield Bond Funds Even During Times of Market Stress . . . . . . . . . . . . . . . . . . . . . 40 2.9: High-Yield Bond Fund Holdings by Selected Asset Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 2.10: Bond Funds Have Experienced Net Inflows Through Most of the Past Decade . . . . . . . . . . . . . . . . . . . . . . . 42 2.11: Net New Cash Flow to Index Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.12: Funds Indexed to the S&P 500 Held 31 Percent of Index Mutual Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . 45 2.13: Index Equity Mutual Funds’ Share Continued to Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.14: Some of the Outflows from Domestic Equity Mutual Funds Have Gone to ETFs . . . . . . . . . . . . . . . . . . . . . . . 47 2.15: Assets of Large 401(k) Plans Are Increasingly Held in Collective Investment Trusts . . . . . . . . . . . . . . . . . . . . 47 2.16: Net New Cash Flow to Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 2.17: Money Market Funds Managed 23 Percent of U.S. Businesses’ Short-Term Assets in 2015 . . . . . . . . . . . . . . . . 49 2.18: Net New Cash Flow to Retail and Institutional Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 2.19: Net New Cash Flow to Taxable Retail Money Market Funds Is Related to Interest Rate Spread . . . . . . . . . . . . . . 51 2.20: Prime Money Market Fund Holdings of Treasury and Agency Securities and Repurchase Agreements . . . . . . . . . . 52 2.21: Assets Migrated from Prime Funds into Government Funds in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

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2016 INVESTMENT COMPANY FACT BOOK

Chapter 3

EXCHANGE-TRADED FUNDS

Figure 3.1: The United States Has the Largest ETF Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 3.2: Total Net Assets and Number of ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3.3: Creation of ETF Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3.4: There Are Many ETF Liquidity Providers in the Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.5: Most ETF Activity Occurs on the Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 3.6: High-Yield Bond ETFs Added Liquidity to the High-Yield Bond Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 3.7: Net Issuance of ETF Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 3.8: Net Issuance of ETF Shares by Investment Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 3.9: Total Net Assets of ETFs Were Concentrated in Large-Cap Domestic Stocks . . . . . . . . . . . . . . . . . . . . . . . . . 71 3.10: Number of ETFs Entering and Leaving the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.11: ETF-Owning Households Held a Broad Range of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 3.12: Characteristics of ETF-Owning Households . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 3.13: ETF-Owning Households Are Willing to Take More Investment Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Chapter 4

CLOSED-END FUNDS Figure 4.1: Total Assets of Closed-End Funds Were $261 Billion at Year-End 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4.2: Equity Funds’ Growing Share of the Closed-End Fund Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 4.3: Closed-End Fund Net Share Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 4.4: Closed-End Fund Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 4.5: Closed-End Funds Are Employing Structural and Certain Types of Portfolio Leverage . . . . . . . . . . . . . . . . . . . 83 4.6: Preferred Shares Comprised the Majority of Closed-End Fund Structural Leverage . . . . . . . . . . . . . . . . . . . . . 84 4.7: Use of Portfolio Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 4.8: Closed-End Fund Investors Owned a Broad Range of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 4.9: Closed-End Fund Investors Had Above-Average Household Incomes and Financial Assets . . . . . . . . . . . . . . . . . 87

Chapter 5

MUTUAL FUND EXPENSES AND FEES

Figure 5.1: Expense Ratios Incurred by Mutual Fund Investors Have Declined Substantially Since 2000 . . . . . . . . . . . . . . . . 91 5.2: Mutual Fund Expense Ratios Tend to Fall as Fund Assets Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 5.3: Fund Shareholders Paid Below-Average Expense Ratios for Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.4: Assets Are Concentrated in Lower-Cost Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 5.5: Total Net Assets and Number of Index Mutual Funds Have Increased in Recent Years . . . . . . . . . . . . . . . . . . . . 95 5.6: Expense Ratios of Actively Managed and Index Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.7: Expense Ratios for Selected Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 5.8: Front-End Sales Loads That Investors Pay Are Well Below the Maximum Front-End Sales Loads That Funds Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 5.9: Most Net New Cash Flow Was in No-Load Institutional Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 5.10: Total Net Assets of Long-Term Mutual Funds Are Concentrated in No-Load Share Classes . . . . . . . . . . . . . . . 105 5.11: A Variety of Arrangements May Be Used to Compensate 401(k) Service Providers . . . . . . . . . . . . . . . . . . . 107 5.12: 401(k) Equity Mutual Fund Assets Are Concentrated in Lower-Cost Funds . . . . . . . . . . . . . . . . . . . . . . . . 109

FIGURES

3

Chapter 6

CHARACTERISTICS OF MUTUAL FUND OWNERS Figure 6.1: 43 Percent of U.S. Households Owned Mutual Funds in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 6.2: Characteristics of Mutual Fund Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 6.3: Incidence of Mutual Fund Ownership Is Greatest Among the Baby Boom Generation and Generation X . . . . . . . . 114 6.4: The Baby Boom Generation Is the Largest Shareholder Group and Holds More Than Half of Household Mutual Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 6.5: Ownership of Mutual Funds Increases with Household Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 6.6: Most Households That Own Mutual Funds Have Moderate Incomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 6.7: Younger Generations Purchased First Mutual Fund Earlier Than Older Generations . . . . . . . . . . . . . . . . . . . . 118 6.8: Employer-Sponsored Retirement Plans Are Increasingly the Source of First Mutual Fund Purchase . . . . . . . . . . . 119 6.9: Majority of Mutual Fund Investors Focus on Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 6.10: 80 Percent of Mutual Fund–Owning Households Held Shares Inside Employer-Sponsored Retirement Plans . . . . . 122 6.11: Nearly Half of Mutual Fund–Owning Households Held Shares Through Multiple Sources . . . . . . . . . . . . . . . . 123 6.12: Households’ Mutual Fund Assets by Type of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 6.13: Most Shareholders View the Mutual Fund Industry Favorably . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 6.14: Households’ Willingness to Take Investment Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 6.15: Equity Funds Are the Most Commonly Owned Type of Mutual Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 6.16: More Than Eight in 10 Mutual Fund–Owning Households Have Confidence in Mutual Funds . . . . . . . . . . . . . . 128 6.17: Internet Access Is Nearly Universal Among Mutual Fund–Owning Households . . . . . . . . . . . . . . . . . . . . . . 129

4

2016 INVESTMENT COMPANY FACT BOOK

Chapter 7

RETIREMENT AND EDUCATION SAVINGS

Figure 7.1: Retirement Resource Pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 7.2: Primary Reason for Household Saving Changes with Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 7.3: Social Security Benefit Formula Is Highly Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 7.4: Near-Retiree Households Across All Income Groups Have Retirement Assets, DB Plan Benefits, or Both . . . . . . . . 136 7.5: U.S. Total Retirement Market Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 7.6: Total U.S. Retirement Assets and Unfunded Pension Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 7.7: Many U.S. Households Have Tax-Advantaged Retirement Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 7.8: Rates of IRA or Defined Contribution Plan Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 7.9: Defined Contribution Plan Assets by Type of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 7.10: 401(k) Sponsors Use a Variety of Plan Designs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 7.11: Incidence of Investment Options Offered in 401(k) Plans by Type of Investment . . . . . . . . . . . . . . . . . . . . . 144 7.12: 401(k) Asset Allocation Varied with Participant Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 7.13: Asset Allocation to Equities Varied Widely Among 401(k) Plan Participants . . . . . . . . . . . . . . . . . . . . . . . . 147 7.14: Target Date Funds’ 401(k) Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 7.15: 401(k) Balances Tend to Increase with Participant Age and Job Tenure . . . . . . . . . . . . . . . . . . . . . . . . . . 149 7.16: IRA Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 7.17: 40 Million U.S. Households Owned IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 7.18: New Roth IRAs Often Are Opened with Contributions; New Traditional IRAs Often Are Opened with Rollovers . . . 153 7.19: Multiple Sources of Information Are Consulted for the Rollover Decision . . . . . . . . . . . . . . . . . . . . . . . . . 154 7.20: IRA Asset Allocation Varied with Investor Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 7.21: Roth IRA Investors Rarely Take Withdrawals; Traditional IRA Investors Are Heavily Affected by RMDs . . . . . . . . 157 7.22: Traditional IRA Withdrawals Among Retirees Often Are Used to Pay for Living Expenses . . . . . . . . . . . . . . . . 158 7.23: Substantial Amount of Retirement Assets Are Invested in Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . 159 7.24: Majority of Mutual Fund Retirement Account Assets Were Invested in Equities . . . . . . . . . . . . . . . . . . . . . . 160 7.25: Target Date and Lifestyle Mutual Fund Assets by Account Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 7.26: Target Date, Lifestyle, and Index Funds Have Risen as a Share of DC Plans’ Mutual Fund Assets . . . . . . . . . . . . 163 7.27: Section 529 Savings Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 7.28: Characteristics of Households Saving for College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

FIGURES

5

CHAPTER ONE

U.S.-Registered Investment Companies

The largest segment of the asset management business in the United States is made up of registered investment companies. U.S.-registered investment companies play a major role in the U.S. economy and financial markets, and a growing role in global financial markets. These funds managed $18.1 trillion in assets at year-end 2015, largely on behalf of more than 90 million U.S. retail investors. The industry has experienced strong growth over the past quarter century from asset appreciation and strong demand from households due to rising household wealth, the aging U.S. population, and the evolution of employer-based retirement systems. 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 2015................................................................................................................ 8 Americans’ Continued Reliance on Investment Companies......................................................................... 11 Role of Investment Companies in Financial Markets . . ................................................................................... 14 Types of Intermediaries and Number of Investment Companies . . ............................................................... 15 Investment Company Employment.................................................................................................................. 23

Investment Company Assets in 2015 U.S.-registered investment companies* managed $18.1 trillion in assets at year-end 2015 (Figure 1.1), approximately $0.1 trillion less than at year-end 2014. Markets were volatile in 2015, and returns did little to change total net assets in aggregate. International stock markets† posted modest negative returns in dollar terms, for example, contributing to the slight decrease in total net assets of funds invested in equity markets. The poor dollar returns on European stock markets, relative to positive local currency returns, were because of U.S. dollar appreciation against the euro, which lowers the value of equity and bond funds holding unhedged euro-denominated assets. The U.S. mutual fund and exchange-traded fund (ETF) markets—with $17.8 trillion in assets under management at year-end 2015—remained the largest in the world, accounting for 48 percent of the $37.2 trillion in regulated open-end fund assets worldwide (Figure 1.2).‡ The majority of U.S. mutual fund and ETF assets at year-end 2015 were in long-term funds, with equity funds comprising 56 percent. Within equity funds, domestic funds (those that invest primarily in shares of U.S. corporations) held 41 percent of total assets and world funds (those that invest significantly in shares of non-U.S. corporations) accounted for 15 percent. Bond funds held 21 percent of U.S. mutual fund and ETF assets. Money market funds, hybrid funds, and other funds—such as those that invest primarily in commodities—held the remainder (23 percent).

* The term investment companies or U.S. investment companies will be used at times throughout this book in place of U.S.-registered investment companies. U.S.-registered investment companies are open-end mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts. † As measured by the MSCI All Country World Daily ex-U.S. Gross Total Return Index. ‡ The International Investment Fund Association has expanded its survey of fund assets globally to include some funds not previously captured. Regulated open-end fund assets outside the United States increased by $3.6 trillion in the fourth quarter of 2014 due to the broader survey; see www.ici.org/research/stats/worldwide/ww_q1_15_explanation.

8

2016 INVESTMENT COMPANY FACT BOOK

FIGURE 1.1

Investment Company Total Net Assets by Type Billions of dollars; year-end, 1998–2015

Mutual funds1

Closed-end funds 2

ETFs 3

UITs

Total4

1998

5,525

156

16

94

5,790

1999

6,846

147

34

92

7,119

2000

6,965

143

66

74

7,247

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

8,096

253

228

37

8,614

2005

8,891

276

301

41

9,509

2006

10,398

297

423

50

11,168

2007

12,000

312

608

53

12,974

2008

9,621

184

531

29

10,365

2009

11,113

223

777

38

12,151

2010

11,833

238

992

51

13,114

2011

11,632

242

1,048

60

12,983

2012

13,057

264

1,337

72

14,729

2013

15,051

279

1,675

87

17,091

2014

15,875

289

1,974

101

18,240

2015

15,652

261

2,100

94

18,107

1 Mutual

fund data do not include mutual funds that invest primarily in other mutual funds. fund data include preferred share classes. 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 exclude ETFs that primarily invest in other ETFs. 4 Total investment company assets include mutual fund holdings of closed-end funds and ETFs. Note: Data are for investment companies that report statistical information to the Investment Company Institute. Assets of these companies are 98 percent of investor assets. Components may not add to the total because of rounding. Sources: Investment Company Institute and Strategic Insight Simfund 2 Closed-end

U.S.-REGISTERED INVESTMENT COMPANIES

9

Mutual funds recorded $102 billion in net outflows in 2015 (Figure 2.3), while other U.S.registered investment companies posted positive net inflows. On net, investors redeemed $123 billion from long-term mutual funds. Money market funds, by contrast, experienced net inflows of $21 billion. Mutual fund shareholders reinvested $224 billion in income dividends and $364 billion in capital gains distributions that mutual funds paid out during the year. Investor demand for ETFs continued to thrive with net share issuance (including reinvested dividends) totaling $231 billion in 2015 (Figure 3.7). Unit investment trusts (UITs) had new deposits of $66 billion, essentially unchanged from last year, and closed-end funds issued $2 billion in new shares, on net (Figure 4.3). FIGURE 1.2

The United States Has the World’s Largest Regulated Open-End Fund Market Percentage of total net assets, year-end 2015

5% Other Americas 13% Africa and Asia-Pacific 48% United States 34% Europe

Total worldwide regulated open-end fund assets: $37.2 trillion

41

Domestic equity funds

15

World equity funds

21

Bond funds

16

Money market funds

8

Hybrid and other funds*

Total U.S. mutual fund and ETF assets: $17.8 trillion

* This category includes ETFs—both registered and not registered under the Investment Company Act of 1940—that invest primarily in commodities, currencies, and futures. Note: Regulated open-end funds include mutual funds, exchange-traded funds (ETFs), and institutional funds. Components may not add to 100 percent because of rounding. Sources: Investment Company Institute and International Investment Funds Association

10

2016 INVESTMENT COMPANY FACT BOOK

Americans’ Continued Reliance on Investment Companies Households make up the largest group of investors in funds, and registered investment companies managed 22 percent of household financial assets at year-end 2015 (Figure 1.3). As households have come to rely more on funds over the past decade, their demand for directly held equities and bonds has generally fallen over time (Figure 1.4). For example, from 2009 to 2014, households sold $781 billion, on net, in bonds that they held directly. In contrast, in 2015, households purchased $308 billion of directly held bonds. Bond funds recorded moderate outflows in 2015, with investors redeeming $25 billion. Overall, households invested an additional $187 billion in long-term registered investment companies in 2015. From 2006 to 2015, households invested an annual average of $366 billion, on net, in long-term registered investment companies, with net investments each year except 2008. In contrast, households sold an annual average of $274 billion in directly held equities and bonds, on net. FIGURE 1.3

Share of Household Financial Assets Held in Investment Companies Percentage of household financial assets; year-end, 1980–2015

22

2 1980

1985

1990

1995

2000

2005

2010

2015

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

U.S.-REGISTERED INVESTMENT COMPANIES

11

FIGURE 1.4

Household Net Investments in Funds, Bonds, and Equities Billions of dollars, 2006–2015

Directly held equities Directly held bonds Long-term registered investment companies 1

325 392

897

470

-132

-332

-640

-1,139

2006

2007

71

599 -31

99 -86

455 -71 -252

257 -91 -338

482 -310

433

418

-422

-296

308 187 -249

-79

2008

2009

2010

2011

2012 2

2013

2014

2015

1 Data

for long-term registered investment companies include mutual funds, variable annuities, ETFs, and closed-end funds. 2012, directly held bonds had outflows of less than $500 million. Note: Household net investments include net new cash flow and reinvested dividends. Sources: Investment Company Institute and Federal Reserve Board 2 In

The growth of individual retirement accounts (IRAs) and defined contribution (DC) plans, particularly 401(k) plans, explains some of the increased household reliance on investment companies during the past two decades. At year-end 2015, households had 9.6 percent of their financial assets in 401(k) and other DC retirement plans, up from 7.6 percent in 1995. Mutual funds managed 54 percent of the assets in these plans in 2015, more than double the 26 percent in 1995 (Figure 1.5). IRAs made up 10.4 percent of household financial assets at year-end 2015, with mutual funds managing 48 percent of IRA assets that year. Mutual funds also managed $1.2 trillion in variable annuities outside retirement accounts, as well as $5.7 trillion of other assets outside retirement accounts.

12

2016 INVESTMENT COMPANY FACT BOOK

FIGURE 1.5

Mutual Funds in Household Retirement Accounts Percentage of retirement assets in mutual funds by type of retirement vehicle, 1995–2015

DC plans* 55 42

44

46

50

56

54

2011

2013

2015

47

47

49

48

2009

2011

2013

2015

52

52

2009

32 26

1995

1997

1999

2001

2003

46

48

46

46

1997

1999

2001

2003

2005

2007

52

51

IRAs

38

1995

2005

2007

* This category includes private employer-sponsored DC plans (including 401(k) plans), 403(b) plans, 457 plans, and the Federal Employees Retirement System (FERS) Thrift Savings Plan (TSP). Sources: Investment Company Institute, Federal Reserve Board, Department of Labor, National Association of Government Defined Contribution Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division

U.S.-REGISTERED INVESTMENT COMPANIES

13

Businesses and other institutional investors also rely on funds. Many institutions use money market funds to manage some of their cash and other short-term assets. Nonfinancial businesses held 23 percent of their short-term assets in money market funds at year-end 2015 (Figure 2.17). Institutional investors also have contributed to growing demand for ETFs. Investment managers, including mutual funds and pension funds, use ETFs to invest in markets, to manage liquidity and investor flows, or to hedge their exposures.

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. They held a large portion of the outstanding shares of U.S.-issued equities and money market securities at year-end 2015. Investment companies as a whole were one of the largest groups of investors in U.S. companies that year, holding 31 percent of their outstanding stock at year-end 2015 (Figure 1.6). FIGURE 1.6

Investment Companies Channel Investment to Stock, Bond, and Money Markets Percentage of total market securities held by investment companies, year-end 2015

Mutual funds Other registered investment companies

40

31 26 25

19 16

6 U.S. corporate equity

40 23

11 10

3 U.S. and foreign corporate bonds

1 percent. Primarily includes Class A shares; includes sales where front-end loads are waived. load = 0 percent and contingent deferred sales load (CDSL) > 2 percent. Primarily includes Class B shares. 3 Front-end load ≤ 1 percent, CDSL ≤ 2 percent, and 12b-1 fee > 0.25 percent. Primarily includes Class C shares; excludes institutional share classes. 4 All other load share classes not classified as front-end load, back-end load, or level load. 5 Load share classes with missing load fee data. 6 Front-end load = 0 percent, CDSL = 0 percent, and 12b-1 fee ≤ 0.25 percent. 7 “R” shares include assets in any share class that ICI designates as a “retirement share class.” These share classes are sold predominantly to employer-sponsored retirement plans. However, other share classes—including retail and institutional share classes—also contain investments made through 401(k) plans or IRAs. (*) = inflow or outflow of less than $500 million Note: Components may not add to the totals because of rounding. Data exclude mutual funds that invest primarily in other mutual funds. Sources: Investment Company Institute and Lipper 2 Front-end

104

2016 INVESTMENT COMPANY FACT BOOK

FIGURE 5.10

Total Net Assets of Long-Term Mutual Funds Are Concentrated in No-Load Share Classes Billions of dollars, 2006–2015

All long-term mutual funds Load

2006

2007

2008

2009

2010

$8,060

$8,914

$5,788

$7,797

$9,030

2011

2012

2013

2014

2015

$8,941 $10,364 $12,333 $13,151 $12,897

2,630

2,795

1,722

2,185

2,352

2,176

2,362

2,652

2,615

2,454

Front-end1

2,027

2,190

1,374

1,750

1,882

1,751

1,893

2,148

2,116

2,000

Back-end 2

241

204

102

98

78

50

39

32

24

15

Level 3

340

379

237

328

381

367

417

459

468

429

Other4

15

10

7

8

8

7

11

10

7

8

Unclassified 5

8

13

2

2

4

2

2

2

1

2

No-load 6

4,073

4,588

3,073

4,255

5,091

5,224

6,262

7,598

8,383

8,361

Retail

2,799

3,091

1,957

2,666

3,069

2,991

3,469

4,148

4,645

4,593

Institutional

1,274

1,496

1,116

1,589

2,022

2,233

2,794

3,450

3,738

3,767

Variable annuities

1,225

1,346

854

1,130

1,291

1,251

1,400

1,632

1,674

1,599

“R” share classes7

132

186

139

226

296

290

339

451

479

483

1 Front-end

load > 1 percent. Primarily includes Class A shares; includes sales where front-end loads are waived. load = 0 percent and contingent deferred sales load (CDSL) > 2 percent. Primarily includes Class B shares. 3 Front-end load ≤ 1 percent, CDSL ≤ 2 percent, and 12b-1 fee > 0.25 percent. Primarily includes Class C shares; excludes institutional share classes. 4 All other load share classes not classified as front-end load, back-end load, or level load. 5 Load share classes with missing load fee data. 6 Front-end load = 0 percent, CDSL = 0 percent, and 12b-1 fee ≤ 0.25 percent. 7 “R” shares include assets in any share class that ICI designates as a “retirement share class.” These share classes are sold predominantly to employer-sponsored retirement plans. However, other share classes—including retail and institutional share classes—also contain investments made through 401(k) plans or IRAs. Note: Components may not add to the totals because of rounding. Data exclude mutual funds that invest primarily in other mutual funds. Sources: Investment Company Institute and Lipper 2 Front-end

MUTUAL FUND EXPENSES AND FEES

105

By contrast, no-load share classes have seen net inflows and rising assets over the past 10 years. No-load share classes have accumulated the bulk of the inflows to long-term funds in the past decade. At year-end 2015, no-load share classes accounted for 65 percent of longterm fund assets, up from 51 percent in 2006. Some of the shift toward no-load share classes can be attributed to do-it-yourself investors. A larger factor, however, is the growth of sales through DC plans as well as sales of no-load share classes through sales channels that compensate financial professionals (for example, discount brokers, fee-based advisers, full-service brokerage platforms) with asset-based fees outside of funds.

Services and Expenses in 401(k) Plans Two competing economic pressures confront employers: 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. These costs are both the contributions the employer may make to an employee’s 401(k) account and the costs associated with setting up and administering the 401(k) plan on an ongoing basis. To provide and maintain 401(k) plans, regulations require employers 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.

106

2016 INVESTMENT COMPANY FACT BOOK

As with any employee benefit, the employer generally determines how the costs of providing the benefit will be shared between the employer and employee. 401(k) plan fees can be paid directly by the plan sponsor (the employer), directly by the plan participant (the employee), indirectly by the participant through fees or other reductions in returns paid to the investment provider, or by some combination of these methods (Figure 5.11). FIGURE 5.11

A Variety of Arrangements May Be Used to Compensate 401(k) Service Providers Services provided Fee payment/Form of fee payment

Direct fees: dollar per participant; percentage based on assets; transactional fees Employer/Plan Recordkeeping and administration; plan service and consulting; Direct fees: dollar per participant; legal, compliance, and regulatory percentage based on assets; transactional fees

Recordkeeper/ Retirement service provider

Participant service, education, advice, and communication Recordkeeping; distribution

Recordkeeping/ Administrative payment (percentage of assets)

Asset management; investment products Participants Expense ratio (percentage of assets)

Investment provider(s)

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 Research Perspective, “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2014”

MUTUAL FUND EXPENSES AND FEES

107

One key driver of 401(k) plan fees is plan size. A Deloitte/ICI study of 361 DC plans in 2013 created and analyzed a comprehensive plan fee measure, the “all-in fee.” The study found that 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 of scale are gained as a plan grows because these fixed costs can be spread across more participants, a larger asset base, or both. Plans with a higher percentage of their assets in equity investments tended to have higher all-in fees, reflecting the higher expense ratios associated with equity investing compared with fixed-income investing. The study also examined types of service providers, automatic enrollment, the number of investment options, and variables relating to plans’ relationships with their service providers—but found little impact on fees. In addition, a BrightScope/ICI study of 2013 data for nearly 33,000 401(k) plans also found that plans with more assets had lower total plan cost than those with less assets. Sixty percent of 401(k) assets at year-end 2015 were invested in mutual funds. Participants in 401(k) plans holding mutual funds tend to invest in lower-cost funds and funds with belowaverage portfolio turnover. Both characteristics help to keep down the costs of investing in mutual funds through 401(k) plans. For example, at year-end 2014, 45 percent of 401(k) equity mutual fund assets were in funds that had total annual expense ratios of less than 50 basis points, and another 43 percent had expense ratios between 50 and 100 basis points (Figure 5.12). On an asset-weighted basis, the average total expense ratio incurred on 401(k) participants’ holdings of equity mutual funds through their 401(k) plans was 54 basis points in 2014, less than the asset-weighted average total expense ratio of 70 basis points for equity mutual funds industrywide. Similarly, equity mutual funds held in 401(k) accounts tend to have lower turnover in their portfolios. The asset-weighted average turnover rate of equity funds held in 401(k) accounts was 34 percent in 2014, less than the industrywide assetweighted average of 43 percent.

108

2016 INVESTMENT COMPANY FACT BOOK

FIGURE 5.12

401(k) Equity Mutual Fund Assets Are Concentrated in Lower-Cost Funds Percentage of 401(k) equity mutual fund assets, 2014

45

43

11 1 40 to 60 percent >20 to 40 percent >0 to 20 percent Zero

22 75

16 31

11 4 2 1 8 Participants in their twenties

14 6 12 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 primarily invested in the security indicated. Components do not add to 100 percent because of rounding. The Investment Company Institute classifies balanced funds as hybrid in its data. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Research Perspective, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2014.”

RETIREMENT AND EDUCATION SAVINGS

147

Target Date Funds Target date funds, introduced in the mid-1990s, have grown rapidly in recent years. A target date fund (including both target date mutual funds and other pooled target date investments) follows a predetermined reallocation of assets over time based on a specified target retirement date. 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. Since 2006, the share of 401(k) plans that offer target date funds, the share of 401(k) plan participants offered target date funds, and the share of 401(k) participants holding target date funds all have increased (Figure 7.14). At year-end 2014, target date funds accounted for 18 percent of 401(k) assets, up from 5 percent at year-end 2006. In 2014, 72 percent of 401(k) plans offered target date funds, and 73 percent of 401(k) plan participants were offered target date funds (Figure 7.14). Because not all plan participants choose to allocate assets to these funds, the percentage of 401(k) participants with target date fund assets was lower than the percentage of participants who were offered the option. FIGURE 7.14

Target Date Funds’ 401(k) Market Share Percentage of total 401(k) market; year-end, 2006 and 2014

2006 2014 73

72 57

62 48

19

18 5

Plans offering target date funds

Participants offered target date funds

Participants holding target date funds

Target date fund assets

Note: Funds include mutual funds, bank collective trusts, life insurance separate accounts, and other pooled investment products. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. See ICI Research Perspective, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2014.”

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2016 INVESTMENT COMPANY FACT BOOK

At year-end 2014, 48 percent of 401(k) participants held at least some plan assets in target date funds. In addition, because not all participants with assets in target date funds allocated 100 percent of their holdings to these funds, and because participants with assets in these 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 these funds. Account Balances Account balances tended to be higher the longer 401(k) plan participants had been working for their current employers and the older the participant. Participants in their sixties with more than 30 years of tenure at their current employer had an average 401(k) account balance of $274,043 at year-end 2014 (Figure 7.15). Participants in their forties with five to 10 years of tenure at their current employer had an average 401(k) balance of $66,173. The median 401(k) plan participant was 46 years old at year-end 2014, and the median job tenure was eight years. FIGURE 7.15

401(k) Balances Tend to Increase with Participant Age and Job Tenure Average 401(k) account balance by participant age and tenure, 2014 $300,000

50s

$250,000

60s

$200,000

40s

$150,000 $100,000

30s

$50,000 $0

20s 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 Research Perspective, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2014.”

RETIREMENT AND EDUCATION SAVINGS

149

Plan Loans Most 401(k) participants do not borrow from their plans, although the majority have access to loans. At year-end 2014, 20 percent of participants eligible for loans had loans outstanding, down slightly from 21 percent at year-end 2013. Not all participants, however, have access to 401(k) plan loans—factoring in all 401(k) participants with and without loan access in the EBRI/ICI 401(k) database, only 17 percent had loans outstanding at year-end 2014. The average unpaid loan balances among participants with loans represented about 11 percent of their 401(k) account balances (net of the unpaid loan balances). In aggregate, U.S. Department of Labor data indicate that outstanding loan amounts were less than 2 percent of 401(k) plan assets in 2013.

Individual Retirement Accounts The first type of IRA—known as a traditional IRA—was created under the Employee Retirement Income Security Act of 1974 (ERISA). IRAs provide all workers with a contributory retirement savings vehicle and, through rollovers, give workers leaving jobs a means to preserve the tax benefits and growth opportunities that employer-sponsored retirement plans provide. Roth IRAs, first available in 1998, were created to provide a contributory retirement savings vehicle on an after-tax basis with qualified withdrawals distributed tax-free. In addition, policymakers have added employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs) to encourage small employers to provide retirement plans by simplifying the rules applicable to tax-qualified plans.

150

2016 INVESTMENT COMPANY FACT BOOK

Total IRA assets, $7.3 trillion at year-end 2015, accounted for 31 percent of U.S. retirement assets. Mutual funds accounted for $3.5 trillion of IRA assets at year-end 2015, about the same as at year-end 2014 (Figure 7.16). Assets managed by mutual funds were the largest component of IRA assets, followed by the other asset category, which includes ETFs, closedend funds, individual stocks and bonds, and other securities held through brokerage accounts ($2.9 trillion at year-end 2015). The mutual fund industry’s share of the IRA market was 48 percent at year-end 2015, down slightly from year-end 2014. FIGURE 7.16

IRA Assets Trillions of dollars; year-end, selected years

Other assets 1 Life insurance companies 2 Bank and thrift deposits 3 Mutual funds

5.8

0.9 1.3 0.5 0.3 0.1 0.5 1995

0.3 1.3 2000

0.2

2.2

3.4

1.7

3.7

1.1

0.3 0.3

1.3

0.3 0.3 1.8 2005

2.4

2007

7.3 e

2.8 e

2.9 e

0.4 0.5

0.4 0.5

3.5

3.5

2014

2015

5.0

4.7

2.6

7.3 e

0.3 0.4 1.7 2008

1.8 0.3 0.5 2.4

2010

0.3 0.5 2.8

2012

1 Other

assets includes individual stocks, individual bonds, closed-end funds, ETFs, and other assets held through brokerage or trust accounts. 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. 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. See Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2015.”

RETIREMENT AND EDUCATION SAVINGS

151

IRA Investors More than three out of 10 U.S. households, or about 40 million, owned at least one type of IRA as of mid-2015 (Figure 7.17). Traditional IRAs—those introduced under ERISA—were the most common type, owned by about 30 million U.S. households. Roth IRAs, first available in 1998 under the Taxpayer Relief Act of 1997, were owned by about 20 million U.S. households. Nearly seven million U.S. households owned employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, or SIMPLE IRAs). Although most U.S. households are eligible to make contributions to IRAs, few do so. Indeed, only 14 percent of U.S. households contributed to any type of IRA in tax year 2014. In addition, very few eligible households made “catch-up” contributions to traditional or Roth IRAs. FIGURE 7.17

40 Million U.S. Households Owned IRAs

Year created Traditional IRA

SEP IRA

1974 (Employee Retirement Income Security Act)

Percentage of U.S. households with type of IRA (mid-2015)

Assets in IRAs (billions of dollars, year-end 2015)

30.4 million

24.4%

$6,174 e

6.7 million

5.4%

$495 e

20.3 million

16.3%

$660 e

40.2 million

32.3%

$7,329 e

1978 (Revenue Act)

SAR-SEP IRA

1986 (Tax Reform Act)

SIMPLE IRA

1996 (Small Business Job Protection Act)

Roth IRA

1997 (Taxpayer Relief Act)

Any IRA

Number of U.S. households with type of IRA (mid-2015)

e Data

are estimated. Note: Households may own more than one type of IRA. SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs are employersponsored IRAs. Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “The Role of IRAs in U.S. Households Saving for Retirement, 2015” and “The U.S. Retirement Market, Fourth Quarter 2015.”

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2016 INVESTMENT COMPANY FACT BOOK

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 make rollovers, but analysis of The IRA Investor Database—which contains information on more than 15 million IRA investors—finds that, for the most part, the groups that make rollovers differ from year to year. Rollovers play an important role in opening traditional IRAs. With the availability of retirement accumulations that can be rolled over, whether from DC accounts or as lump-sum distributions from DB plans, most (86 percent) new traditional IRAs in 2013 were opened only with rollovers (Figure 7.18). By contrast, in 2013, 12 percent of Roth IRAs were opened only with rollovers; the majority (75 percent) were opened only with contributions. FIGURE 7.18

New Roth IRAs Often Are Opened with Contributions; New Traditional IRAs Often Are Opened with Rollovers Percentage of new IRAs opened in 2013 by type of IRA

Combination of activities Contribution only Conversion only Rollover only

5

11

3

75 86

9 12 Roth IRAs

Traditional IRAs

Note: New IRAs are accounts that did not exist in The IRA Investor Database in 2012 and were opened by one of the paths indicated in 2013. The calculation excludes IRAs that changed financial services firms. The samples are 0.3 million new Roth IRA investors aged 18 or older at year-end 2013 and 0.7 million new traditional IRA investors aged 25 to 74 at year-end 2013. Components may not add to 100 percent because of rounding. Source: The IRA Investor Database™. See ICI Research Report, “The IRA Investor Profile: Roth IRA Investors’ Activity, 2007–2013.”

RETIREMENT AND EDUCATION SAVINGS

153

Traditional IRA–owning households generally researched the decision to roll over money from their former employer’s retirement plan into a traditional IRA. The most common source of information was professional financial advisers. Advisers were consulted by 63 percent of traditional IRA–owning households with rollovers, with nearly half indicating they primarily relied on financial professionals (Figure 7.19). Older households were more likely to consult professional financial advisers than younger households. Seven percent of traditional IRA– owning households with rollovers indicated their primary source of information was online materials from financial services firms, with younger households more likely to rely on online resources than older households as their primary source of information. FIGURE 7.19

Multiple Sources of Information Are Consulted for the Rollover Decision Percentage of traditional IRA–owning households with rollovers, mid-2015

Source 1 Primary source 63

A financial professional

49

Employer (printed or online materials, seminars, workshops) Printed materials provided by financial services firms Seminars, workshops, or phone representative from financial services firms

38 11 38 4 47 5 43

Spouse or par tner

6 29

Online materials from financia l services firms IRS rules or publications

7 30 5 23

Coworker, friend, or family member Other2

8 7 5

1 Multiple

responses are included; 81 percent of traditional IRA–owning households with rollovers consulted multiple sources of information. 2 Other responses given included: myself, other online information, bank, and books and magazines. Source: Investment Company Institute IRA Owners Survey. See ICI Research Perspective, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2015.”

154

2016 INVESTMENT COMPANY FACT BOOK

Households owning IRAs generally are headed by middle-aged individuals (median age of 54 years) with moderate household incomes (median income of $87,500). These households held a median of $50,000 in IRAs. In addition, many households held multiple types of IRAs. For example, 41 percent of households with traditional IRAs also owned Roth IRAs, and 12 percent also owned employer-sponsored IRAs.

IRA Portfolios At year-end 2013, younger IRA investors tended to have more invested in equities, equity funds, and target date funds, on average, than older investors, according to The IRA Investor Database. Older investors were invested more heavily in non–target date balanced funds* and fixed-income investments. For example, traditional IRA investors in their thirties had, on average, 53 percent of their assets in equities and equity funds and another 19 percent in target date funds (Figure 7.20). Traditional IRA investors in their sixties held 51 percent and 5 percent of their traditional IRA assets, respectively, in these two asset categories. Traditional IRA investors in their sixties had 41 percent of their assets in money market funds (12 percent), bonds and bond funds (18 percent), and non–target date balanced funds (12 percent). By contrast, traditional IRA investors in their thirties held a quarter of their assets in these three asset categories. Roth IRA investors display a similar pattern of investing by age, although Roth IRA investors of all ages tended to have higher allocations to equities and equity funds compared with traditional IRA investors—for example, Roth IRA investors in their thirties and sixties held the same portion of their assets in equities and equity funds (63 percent). Roth IRA investors in their thirties had, on average, 18 percent of their assets in target date funds, while Roth IRA investors in their sixties had 4 percent (Figure 7.20). By contrast, Roth IRA investors in their sixties had nearly a third of their assets in money market funds (9 percent), bonds and bond funds (10 percent), and non–target date balanced funds (13 percent). Roth IRA investors in their thirties held less than one-fifth of their assets in these three asset categories.

* The Investment Company Institute classifies balanced funds as hybrid in its data.

RETIREMENT AND EDUCATION SAVINGS

155

FIGURE 7.20

IRA Asset Allocation Varied with Investor Age Average asset allocation of IRA balances, percentage of assets, year-end 2013

Other investments1 Money market funds Bonds and bond funds2 Non–target date balanced funds3 Target date funds4 Equities and equity funds5 Traditional IRA investors 12.3 5.3 7.6

3.3

11.6

2.2

17.8

18.6

11.6 5.4

52.8

51.4

Investors in their thirties

Investors in their sixties

Roth IRA investors 3.3

6.0 0.9 8.8 17.6

9.1 9.8 12.6 4.0

1.6

63.4

62.9

Investors in their thirties

Investors in their sixties

1 Other

investments includes certificates of deposit and unidentifiable assets. funds include bond mutual funds, bond closed-end funds, and bond ETFs. 3 Balanced funds invest in a mix of equities and fixed-income securities. The Investment Company Institute classifies balanced funds as hybrid in its data. 4 A target date 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. 5 Equity funds include equity mutual funds, equity closed-end funds, and equity ETFs. Note: Percentages are dollar-weighted averages. Components may not add to 100 percent because of rounding. Source: The IRA Investor Database™. See ICI Research Report, “The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007–2013,” and ICI Research Report, “The IRA Investor Profile: Roth IRA Investors’ Activity, 2007–2013.” 2 Bond

156

2016 INVESTMENT COMPANY FACT BOOK

Distributions from IRAs Withdrawals from IRAs tend to occur later in life, often to fulfill required minimum distributions (RMDs). An RMD is equal to a percentage of the IRA balance, based on remaining life expectancy. Traditional IRA owners aged 70½ or older generally must withdraw at least the minimum amount each year or pay a penalty. In tax year 2014, 61 percent of individuals who took traditional IRA withdrawals stated they calculated the withdrawal amount based on RMD rules. In contrast to traditional IRAs, Roth IRAs have no RMDs (unless they are inherited). As a result, withdrawal activity is much lower among Roth IRA investors. In 2013, only 4 percent of Roth IRA investors aged 25 or older made withdrawals, compared with 23 percent of traditional IRA investors (Figure 7.21). Early withdrawal penalties can apply to both Roth and traditional IRA investors younger than 59½, and withdrawal activity is lower among investors younger than 60 compared with investors aged 60 or older. FIGURE 7.21

Roth IRA Investors Rarely Take Withdrawals; Traditional IRA Investors Are Heavily Affected by RMDs Percentage of IRA investors with withdrawals by type of IRA and investor age, 2013

Roth IRA investors Traditional IRA investors

80

23

21 3

9

5

25 to 59

60 to 69

5 70 or older

4 All (25 or older)

Age of IRA investor Note: The samples are 5.1 million Roth IRA investors aged 25 or older at year-end 2013 and 10.7 million traditional IRA investors aged 25 or older at year-end 2013. Source: The IRA Investor Database™. See ICI Research Report, “The IRA Investor Profile: Roth IRA Investors’ Activity, 2007–2013.”

RETIREMENT AND EDUCATION SAVINGS

157

Withdrawals from IRAs tend to be retirement related. Of the 22 percent of traditional IRA– owning households who reported taking withdrawals in tax year 2014, 73 percent reported that the head of household, the spouse, or both were retired. Of retired households that took traditional IRA withdrawals in tax year 2014, 48 percent reported using some or all of the withdrawal amount to pay for living expenses (Figure 7.22). Other uses included reinvesting or saving in another account (37 percent), paying for a healthcare expense (36 percent), and buying, repairing, or remodeling a home (25 percent). Traditional IRA–owning households that reported taking withdrawals in tax year 2014 and were not retired indicated a slightly different pattern for the withdrawals. The nonretired households with withdrawals were less likely to indicate using some or all of the money for living expenses (34 percent) or to reinvest or save it in another account (36 percent) than the retired households (Figure 7.22). FIGURE 7.22

Traditional IRA Withdrawals Among Retirees Often Are Used to Pay for Living Expenses Percentage of traditional IRA–owning households by retirement status, 1 mid-2015

Purpose of traditional IRA withdrawal

Retired1, 2

Not retired3

Took withdrawals to pay for living expenses

48

34

Spent it on a car, boat, or big-ticket item other than a home

12

14

Spent it on a healthcare expense

36

25

Used it for an emergency

23

27

Used it for home purchase, repair, or remodeling

25

27

Reinvested or saved it in another account

37

24

8

12

11

10

Paid for education Some other purpose

The household was considered retired if either the head of household or spouse responded affirmatively to the question: “Are you retired from your lifetime occupation?” 2 The base of respondents includes the 16 percent of traditional IRA–owning households that were retired in mid-2015 and took withdrawals in tax year 2014. 3 The base of respondents includes the 6 percent of traditional IRA–owning households that were not retired in mid-2015 and took withdrawals in tax year 2014. Note: Multiple responses are included. Source: Investment Company Institute IRA Owners Survey. See ICI Research Perspective, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2015.” 1

158

2016 INVESTMENT COMPANY FACT BOOK

Because current withdrawal activity might 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 2015 that did not take a withdrawal in tax year 2014, 72 percent said that they were not likely to take a withdrawal before age 70½. Traditional IRA–owning households that were either (1) retired and did not take withdrawals in tax year 2014 or (2) not retired reported a pattern for the expected role of their future IRA withdrawals in retirement that is consistent with those that withdrew in tax year 2014. Sixty-two percent of these households reported they plan to use IRA withdrawals to pay for living expenses in retirement, and 45 percent reported they plan to reinvest or save their IRA withdrawals in another account.

The Role of Mutual Funds in Retirement Savings At year-end 2015, mutual funds held in DC plans and IRAs accounted for $7.1 trillion, or 30 percent, of the $24.0 trillion U.S. retirement market. The $7.1 trillion in mutual fund retirement assets made up 46 percent of all mutual fund assets at year-end 2015. Mutual funds accounted for 54 percent of DC plan assets and 48 percent of IRA assets (Figure 7.23). Additionally, retirement investors tend to hold long-term mutual funds. At year-end 2015, DC plans and IRAs held 53 percent of equity, hybrid, and bond mutual funds, but only 13 percent of money market funds.

FIGURE 7.23

Substantial Amount of Retirement Assets Are Invested in Mutual Funds Assets, billions of dollars, year-end 2015

Other investments Mutual funds

Other investors DC plans and IRAs 12,897

6,124 6,736

7,329

3,106

e

3,830 6,773

3,630 54% DC plans

IRAs

2,755

53%

3,499 48%

356 Equity, hybrid, and bond mutual funds

2,399

13%

Money market funds

e Data

are estimated. Sources: Investment Company Institute, Federal Reserve Board, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division. See Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2015.”

RETIREMENT AND EDUCATION SAVINGS

159

Across the entire U.S. retirement market, mutual funds play a major role in IRAs and employer-sponsored DC plans, such as 401(k) plans. At year-end 2015, investors held slightly more mutual fund assets in DC plans ($3.6 trillion, or 54 percent of total DC plan assets) than in IRAs ($3.5 trillion, or 48 percent of total IRA assets) (Figure 7.24). Among DC plans, 401(k) plans held the most assets in mutual funds, with $2.8 trillion, followed by 403(b) plans ($429 billion), other private-sector DC plans ($286 billion), and 457 plans ($110 billion).

Types of Mutual Funds Used by Retirement Plan Investors Retirement investors tend to hold equity investments. At year-end 2015, 58 percent of the $7.1 trillion in mutual fund retirement assets held in DC plans and IRAs were invested in domestic or world equity funds (Figure 7.24). By comparison, about 52 percent of overall fund industry assets—retirement and nonretirement accounts—were invested in domestic or world equity funds. Domestic equity funds alone constituted about $3.1 trillion, or 44 percent, of mutual fund assets held in DC plans and IRAs. FIGURE 7.24

Majority of Mutual Fund Retirement Account Assets Were Invested in Equities Billions of dollars, year-end 2015

Equity Domestic

World

Hybrid1

Bond

Money market

Total

IRAs 2

1,460

465

783

576

216

3,499

DC plans

1,688

503

887

411

141

3,630

401(k) plans

1,262

415

747

286

96

2,805

403(b) plans

264

35

76

35

20

429

61

16

18

14

2

110

102

37

47

76

24

286

$3,148

$968

$1,670

$987

$356

$7,130

457 plans Other DC plans 3 Total

Hybrid funds invest in a mix of equities and fixed-income securities. Most target date and lifestyle funds are counted in this category. 2 IRAs include traditional IRAs, Roth IRAs, and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs). 3 Other DC plans includes Keoghs and other private-sector DC plans without 401(k) features. Note: Components may not add to the totals because of rounding. Source: Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2015” 1

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2016 INVESTMENT COMPANY FACT BOOK

Retirement investors also gain exposure to equities and fixed-income securities through hybrid funds. At year-end 2015, 23 percent of mutual fund assets held in DC plans and IRAs were held in hybrid funds, which invest in a mix of equity, bond, and money market securities (Figure 7.24). At year-end 2015, the remaining 19 percent of mutual fund assets held in DC plans and IRAs were invested in bond funds and money market funds. Bond funds held $987 billion, or 14 percent, of mutual fund assets held in DC plans and IRAs, and money market funds accounted for $356 billion, or 5 percent. Target Date and Lifestyle Mutual Funds Target date and lifestyle mutual funds, generally included in the hybrid fund category, have grown more popular among investors and retirement plan sponsors over the past decade. A target date fund follows a predetermined reallocation of assets over time based on a specified target retirement date. 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 $1.1 trillion at year-end 2015, about the same as at year-end 2014 (Figure 7.25). Target date mutual funds’ assets were up 9 percent in 2015, increasing from $703 billion to $763 billion. Assets in lifestyle mutual funds fell 9 percent in 2015, dropping from $395 billion to $361 billion. Most target date mutual fund assets (88 percent) were held in retirement accounts, compared with 43 percent of lifestyle mutual fund assets.

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FIGURE 7.25

Target Date and Lifestyle Mutual Fund Assets by Account Type Billions of dollars; year-end, 2004–2015

763

Other investors IRAs 1 DC plans 2

703 618

Target date mutual funds 3

64 481 46

256 183

5

44

29 9 2004

7

71 49 2005

16

115 26 9 80 2006

15 160 11 40 32

128

116

2007

2008

49 185 2009

21

340 33 66

376 36 74

265

2010

2011

149

160

127

96

427 240

91

77

477

511

340

2012

2013

2014

2015

Lifestyle mutual funds 4 359 238 189 131

94

85 63 34 46 21 16 47 61 24 2004 2005 2006

231 176

264

262

293 162

127

145

145

43 62

50

50

58

72

33 49

70

67

2007

2008

2009

2010

2011

120 46

93

206

395

223

361 206

71

93

86

73

82

78

69

2012

2013

2014

2015

IRAs include traditional IRAs, Roth IRAs, and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs). DC plans include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans without 401(k) features. 3 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. 4 A lifestyle mutual fund maintains a predetermined risk level and generally uses “conservative,” “moderate,” or “aggressive” in its name. Note: Components may not add to the total because of rounding. Source: Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2015” 1 2

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Target date, lifestyle, and index mutual funds have grown as a share of mutual fund assets in DC plans. Target date mutual funds increased 12 percentage points as a share of DC plans’ mutual fund assets from 2004 to year-end 2015, rising from 2 percent to 14 percent (Figure 7.26). At year-end 2015, target date, lifestyle, and index mutual funds made up 35 percent of mutual fund assets in DC plans compared to only 13 percent in 2004. FIGURE 7.26

Target Date, Lifestyle, and Index Funds Have Risen as a Share of DC Plans’ Mutual Fund Assets Percentage of mutual fund assets held in DC plans;1 year end, 2004–2015

Target date funds 2 Lifestyle funds 3 Index funds 4

13 2

1

15 3 3

32

16 4 3

18 5 3

20 7 3

22 8 3

24 10

26 11

28

30 13

12

35

14

12 2

2

2

3

3

3

15

17

19

13

2012

2013

2014

2015

10

10

10

10

10

10

11

12

2004

2005

2006

2007

2008

2009

2010

2011

DC plans include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans without 401(k) features. 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. 3 A lifestyle mutual fund maintains a predetermined risk level and generally uses “conservative,” “moderate,” or “aggressive” in its name. 4 Index mutual funds are equity, bond, and hybrid funds that target specific market indexes with the general objective of meeting the performance of that index. Equity index funds are the most common type of index fund. Note: Components may not add to the total because of rounding. Source: Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2015” 1 2

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The Role of Mutual Funds in Education Savings Twenty-four percent of households that owned mutual funds in 2015 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 Economic Growth and Tax Relief Reconciliation Act (EGTRRA), enacted in 2001, enhanced the attractiveness of Section 529 plans and Coverdell Education Savings Accounts (ESAs)—two education savings vehicles—by allowing greater contributions to them and making them more flexible. The Pension Protection Act (PPA), enacted in 2006, made the EGTRRA enhancements to Section 529 plans permanent. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the EGTRRA enhancements to Coverdell ESAs for two years; the American Taxpayer Relief Act of 2012 made these enhancements permanent. Assets in Section 529 savings plans increased 3 percent in 2015, with $230 billion at yearend 2015, up from $224 billion at year-end 2014 (Figure 7.27). As of year-end 2015, there were 11.3 million 529 savings plan accounts, with an average account size of approximately $20,300.

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2016 INVESTMENT COMPANY FACT BOOK

FIGURE 7.27

Section 529 Savings Plan Assets Billions of dollars; year-end, selected years

203.9

223.9

229.8

2014

2015

145.0 116.2

112.3 89.1

68.7 34.8 8.6 2001

2003

2005

2007

2008

2009

2011

2013

Note: Data were estimated for a few individual state observations in order to construct a continuous time series. Sources: Investment Company Institute and College Savings Plans Network. See Investment Company Institute, “529 Plan Program Statistics, December 2015.”

In mid-2015, as a group, households saving for college through 529 plans, Coverdell ESAs, or mutual funds held outside these accounts tended to be headed by younger individuals, with 43 percent younger than 45 (Figure 7.28). Heads of households saving for college had a range of education attainment: 44 percent had less than a college degree and 56 percent had a college degree or more. These households also had a range of incomes: 32 percent earned less than $75,000; 15 percent earned between $75,000 and $99,999; and more than half earned $100,000 or more. Nearly six in 10 of these households had children (younger than 18) in the home, and 34 percent had more than one child in the home.

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FIGURE 7.28

Characteristics of Households Saving for College Percentage of U.S. households saving for college, 1 mid-2015

Age of head of household 2 Younger than 35

21

35 to 44

22

45 to 54

29

55 to 64

16

65 or older

12

Education level High school diploma or less

17

Associate’s degree or some college

27

Completed college

24

Some graduate school or completed graduate school

32

Household income 3 Less than $25,000

7

$25,000 to $34,999

5

$35,000 to $49,999

7

$50,000 to $74,999

14

$75,000 to $99,999

14

$100,000 or more

53

Number of children in home 4 None

42

One

24

Two

22

Three or more

12

1 Households

saving for college are households that own education savings plans (Coverdell ESAs or 529 plans) or that said paying for education was one of their financial goals for their mutual funds. 2 Age is based on the sole or co-decisionmaker for saving and investing. 3 Total reported is household income before taxes in 2014. 4 The number of children reported is children younger than 18 living in the home.

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For More Information »» Individual Retirement Account Resource Center www.ici.org/iraresource

»» 401(k) Resource Center www.ici.org/401k

»» Target Retirement Date Funds Resource Center www.ici.org/trdf

»» 529 Plan Program Statistics www.ici.org/research/stats/529s

»» How America Supports Retirement: Challenging the Conventional Wisdom on Who Benefits www.ici.org/whobenefits

»» Getting the Numbers Right on Investment Advice for Retirement Savers www.ici.org/viewpoints/view_15_fiduciary_data

»» On Fiduciary Rule, New York Times Relies on Fatally Flawed Research www.ici.org/viewpoints/view_15_fatal_flaw

RETIREMENT AND EDUCATION SAVINGS

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DATA SECTION 1

PART TWO

Data Tables

DATA SECTION 1

DATA TABLES Section 1

MUTUAL FUND TOTALS Table 1: Total Net Assets, Number of Funds, and Number of Share Classes of the Mutual Fund Industry . . . . . . . . . . . . . . . 172 2: Total Sales, New Sales, Exchange Sales, Redemptions, and Exchange Redemptions of the Mutual Fund Industry . . . . . 173 3: Total Net Assets of the Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 4: Total Net Assets of the Mutual Fund Industry by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . 175 5: Number of Funds of the Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 6: Number of Funds of the Mutual Fund Industry by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . 177 7: Number of Share Classes of the Mutual Fund Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 8: Number of Share Classes of the Mutual Fund Industry by Composite Investment Objective . . . . . . . . . . . . . . . . . . 179

Section 2

CLOSED-END FUNDS, EXCHANGE-TRADED FUNDS, AND UNIT INVESTMENT TRUSTS Table 9: Closed-End Funds: Total Assets and Number of Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 10: Closed-End Funds: Gross Issuance, Gross Redemptions, and Net Issuance by Type of Fund . . . . . . . . . . . . . . . . 181 11: Exchange-Traded Funds: Total Net Assets by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 12: Exchange-Traded Funds: Number of Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 13: Exchange-Traded Funds: Net Issuance by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 14: Unit Investment Trusts: Total Net Assets, Number of Trusts, and New Deposits by Type of Trust . . . . . . . . . . . . . 185

Section 3

LONG-TERM MUTUAL FUNDS Table 15: Liquid Assets and Liquidity Ratio of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 16: Liquidity Ratio of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . 187 17: Net New Cash Flow of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 18: Net New Cash Flow and Components of Net New Cash Flow of Equity Mutual Funds . . . . . . . . . . . . . . . . . . . . . 189 19: Net New Cash Flow and Components of Net New Cash Flow of Hybrid Mutual Funds . . . . . . . . . . . . . . . . . . . . 190 20: Net New Cash Flow and Components of Net New Cash Flow of Bond Mutual Funds . . . . . . . . . . . . . . . . . . . . . . 191 21: Net New Cash Flow of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . 192 22: New Sales of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 23: Exchange Sales of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . 194 24: Redemptions of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . 195 25: Exchange Redemptions of Long-Term Mutual Funds by Composite Investment Objective . . . . . . . . . . . . . . . . . . . 196 26: Annual Redemption Rates of Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 27: Portfolio Holdings of Long-Term Mutual Funds and Percentage of Total Net Assets . . . . . . . . . . . . . . . . . . . . . . 198 28: Portfolio Holdings of Long-Term Mutual Funds as a Percentage of Total Net Assets by Type of Fund . . . . . . . . . . . . 199 29: Paid and Reinvested Dividends of Long-Term Mutual Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 200 30: Paid and Reinvested Capital Gains of Long-Term Mutual Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . 201 31: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Long-Term Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 32: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Equity Mutual Funds . . 203 33: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Hybrid Mutual Funds . . 204 34: Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Bond Mutual Funds . . . 205

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Section 4

MONEY MARKET FUNDS Table 35: Money Market Funds: Total Net Assets, Number of Funds, and Number of Share Classes by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 36: Total Net Assets of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 37: Net New Cash Flow of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 38: Net New Cash Flow and Components of Net New Cash Flow of Money Market Funds . . . . . . . . . . . . . . . . . . . . . 209 39: Paid and Reinvested Dividends of Money Market Funds by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 40: Asset Composition of Taxable Government Money Market Funds as a Percentage of Total Net Assets . . . . . . . . . . . 211 41: Asset Composition of Taxable Prime Money Market Funds as a Percentage of Total Net Assets . . . . . . . . . . . . . . . 212

Section 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS Table 42: Alternative Strategies Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 43: Emerging Markets Debt Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 44: Floating-Rate High-Yield Bond Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 45: Funds of Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . 216 46: Funds of Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 47: Index Mutual Funds: Total Net Assets and Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 48: Index Mutual Funds: Number of Funds and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 49: Index Mutual Funds: New Sales and Exchange Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 50: Index Mutual Funds: Redemptions and Exchange Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 51: Inflation-Protected and Treasury Inflation-Protected Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 52: Mutual Funds by Market Capitalization: Total Net Assets and Net New Cash Flow by Type of Fund . . . . . . . . . . . . . 223 53: Mutual Funds by Market Capitalization: Number of Funds and Number of Share Classes by Type of Fund . . . . . . . . . 224 54: Sector Mutual Funds: Total Net Assets and Net New Cash Flow by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . 225 55: Sector Mutual Funds: Number of Funds and Number of Share Classes by Type of Fund . . . . . . . . . . . . . . . . . . . 226 56: Target Date and Lifestyle Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 57: Target Date and Lifestyle Mutual Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . 228 58: Variable Annuity Mutual Funds: Total Net Assets, Net New Cash Flow, and Number of Funds . . . . . . . . . . . . . . . . 229 59: Variable Annuity Mutual Funds: Components of Net New Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

Section 6

INSTITUTIONAL INVESTORS IN MUTUAL FUNDS Table 60: Total Net Assets of Mutual Funds Held in Individual and Institutional Accounts . . . . . . . . . . . . . . . . . . . . . . . . 231 61: Total Net Assets of Institutional Investors in Mutual Funds by Type of Institution and Type of Fund . . . . . . . . . . . . 232 62: Total Net Assets of Institutional Investors in Taxable Money Market Funds by Type of Institution and Type of Fund . . . 233

Section 7

RETIREMENT ACCOUNT INVESTING IN MUTUAL FUNDS Table 63: Mutual Fund DC Plan Assets and Estimated Net New Cash Flow by Type of Fund . . . . . . . . . . . . . . . . . . . . . . 234 64: Mutual Fund IRA Assets and Estimated Net New Cash Flow by Type of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 235

Section 8

WORLDWIDE REGULATED OPEN-END FUNDS Table 65: Worldwide Total Net Assets of Regulated Open-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 66: Worldwide Number of Regulated Open-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 67: Worldwide Net Sales of Regulated Open-End Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

DATA TABLES

171

DATA SECTION 1

TABLE 1

Total Net Assets, Number of Funds, and Number of Share Classes of the Mutual Fund Industry Year-end

Year 1940 1945 1950 1955 1960 1965 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total net assets

Billions of dollars

$0.45 1.28 2.53 7.84 17.03 35.22 47.62 45.87 51.28 48.94 55.84 94.51 134.76 241.37 296.68 292.99 370.68 495.39 715.67 769.17 809.37 980.67 1,065.19 1,393.19 1,642.54 2,069.96 2,155.32 2,811.29 3,525.80 4,468.20 5,525.21 6,846.34 6,964.63 6,974.91 6,383.16 7,402.12 8,095.80 8,891.38 10,398.16 12,000.17 9,620.64 11,112.62 11,833.36 11,632.35 13,056.68 15,050.82 15,875.27 15,651.96

Number of share classes – – – – – – – – – – – – – – – – 1,243 1,528 1,835 2,312 2,737 2,935 3,177 3,587 4,208 5,562 7,697 9,007 10,352 12,002 13,720 15,262 16,738 18,022 18,982 19,320 20,041 20,554 21,264 21,638 22,263 21,651 21,911 22,283 22,637 23,389 24,227 25,038

Number of funds 68 73 98 125 161 170 361 426 452 477 505 526 564 665 857 1,026 1,243 1,528 1,835 2,312 2,737 2,935 3,079 3,403 3,824 4,534 5,325 5,725 6,248 6,684 7,314 7,791 8,155 8,305 8,243 8,127 8,045 7,977 8,123 8,041 8,040 7,666 7,555 7,588 7,590 7,715 7,928 8,116

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

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2016 INVESTMENT COMPANY FACT BOOK

DATA SECTION 1

TABLE 2

Total Sales, New Sales, Exchange Sales, Redemptions, and Exchange Redemptions of the Mutual Fund Industry Billions of dollars, annual

Year 1945 1950 1955 1960 1965 1970 1975 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total sales 1 $0.29 0.52 1.21 2.10 4.36 4.63 10.06 247.42 472.13 626.94 547.77 680.12 953.85 1,204.90 1,251.19 1,176.81 1,444.84 1,564.81 2,037.64 2,749.68 3,187.49 3,075.63 3,600.62 4,671.44 5,801.23 7,230.40 9,043.58 11,109.54 12,866.21 13,168.76 12,393.59 12,191.21 13,939.28 17,409.26 23,470.65 26,349.29 20,680.22 18,210.24 17,837.57 17,023.43 18,158.48 18,714.67 20,933.30

New sales – – – – $3.93 3.84 8.94 238.96 452.42 604.09 532.04 661.74 933.37 1,179.40 1,220.27 1,143.62 1,401.21 1,517.41 1,990.53 2,704.69 3,137.76 3,019.76 3,526.00 4,586.71 5,704.83 7,126.92 8,922.96 10,970.50 12,747.53 13,084.32 12,315.40 12,101.07 13,812.45 17,228.70 23,236.42 26,135.06 20,528.82 18,053.46 17,661.79 16,832.69 17,969.37 18,499.38 20,709.41

Exchange sales 2 – – – – – – – $10.10 14.44 28.25 35.67 36.66 46.55 107.75 205.68 134.28 130.66 138.79 155.75 197.43 248.79 317.55 351.53 504.73 613.44 742.97 949.96 1,149.75 797.34 747.34 572.50 409.00 420.84 487.72 606.47 735.12 530.25 420.18 448.06 422.03 517.69 425.48 452.11

Redemptions $0.11 0.28 0.44 0.84 1.96 2.99 9.57 216.08 362.44 588.35 565.83 607.02 864.88 1,015.64 1,178.75 1,166.67 1,327.05 1,470.83 1,879.69 2,548.28 2,904.44 2,928.62 3,314.86 4,266.20 5,324.29 6,649.27 8,562.10 10,586.59 12,242.32 13,011.36 12,361.66 12,038.96 13,546.77 16,751.98 22,352.20 25,714.11 20,676.85 18,320.28 17,739.21 16,621.11 17,778.80 18,387.59 20,808.76

Exchange redemptions 3 – – – – – – – $9.94 14.59 27.86 36.03 37.11 46.84 107.96 207.35 134.24 131.95 140.98 154.31 198.15 253.95 325.00 351.08 503.94 618.49 743.37 947.36 1,145.42 798.08 745.65 573.76 417.95 432.42 492.20 611.96 730.11 528.35 434.88 466.52 434.12 531.09 433.36 454.43

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

MUTUAL FUND TOTALS

173

DATA SECTION 1

TABLE 3

Total Net Assets of the Mutual Fund Industry Billions of dollars, year-end

Long-term funds Year 1960 1965 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983

Total $17.03 35.22 47.62 45.87 51.28 48.94 55.84 94.51 134.76 241.37 296.68 292.99

Equity $16.00 32.76 45.13 37.49 39.19 34.07 32.67 35.88 44.42 41.19 53.63 76.97

Bond and income $1.02 2.46 2.49 4.68 8.39 10.98 12.31 13.10 13.98 14.01 23.21 36.63

Money market funds – – – $3.70 3.69 3.89 10.86 45.53 76.36 186.16 219.84 179.39

Long-term funds Equity Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total $370.68 495.39 715.67 769.17 809.37 980.67 1,065.19 1,393.19 1,642.54 2,069.96 2,155.32 2,811.29 3,525.80 4,468.20 5,525.21 6,846.34 6,964.63 6,974.91 6,383.16 7,402.12 8,095.80 8,891.38 10,398.16 12,000.17 9,620.64 11,112.62 11,833.36 11,632.35 13,056.68 15,050.82 15,875.27 15,651.96

Domestic $74.55 103.39 138.98 158.02 171.40 221.45 211.18 365.21 468.41 626.54 691.57 1,052.57 1,440.81 2,021.66 2,586.31 3,456.64 3,369.73 2,947.93 2,273.05 3,118.32 3,626.37 3,929.72 4,472.13 4,694.65 2,738.82 3,564.56 4,053.93 3,855.40 4,324.64 5,726.85 6,233.17 6,045.88

World $5.19 7.94 15.47 17.43 17.98 23.59 28.30 39.52 45.68 114.13 161.19 196.51 285.20 346.37 391.64 585.25 564.75 444.47 369.37 535.05 716.20 955.73 1,360.45 1,718.57 916.34 1,307.98 1,542.70 1,357.59 1,614.10 2,035.87 2,081.15 2,102.37

Bond Hybrid $11.15 17.61 25.76 29.25 26.35 35.64 35.98 52.04 77.63 142.33 161.40 206.70 248.36 311.90 360.04 374.64 360.92 358.03 335.28 447.57 552.25 621.48 731.50 821.52 562.26 717.58 842.20 883.98 1,034.06 1,285.01 1,376.59 1,336.58

Taxable $25.45 83.20 167.63 171.40 168.96 166.25 171.14 239.77 308.37 367.05 302.84 349.21 396.56 457.50 536.96 545.18 545.58 642.96 810.26 924.85 971.03 1,018.68 1,130.52 1,305.51 1,233.18 1,748.11 2,117.07 2,346.90 2,810.53 2,785.99 2,893.24 2,818.96

Money market funds

Municipal $20.79 39.44 75.67 76.97 86.73 105.66 120.25 154.20 196.26 254.60 227.31 253.29 253.07 271.89 298.59 271.48 278.41 296.22 330.13 336.31 328.24 338.95 365.09 374.15 337.79 458.50 473.95 497.53 580.17 499.29 566.48 593.41

Taxable $209.75 207.55 228.35 254.68 272.20 358.62 414.56 452.46 451.35 461.88 501.11 631.32 763.94 901.23 1,166.97 1,413.25 1,611.38 2,026.23 1,988.78 1,749.73 1,589.70 1,690.45 1,969.42 2,617.67 3,338.56 2,916.96 2,473.51 2,399.25 2,405.74 2,447.20 2,463.85 2,499.81

Tax-exempt $23.80 36.25 63.81 61.42 65.76 69.47 83.78 89.98 94.84 103.44 109.89 121.69 137.87 157.66 184.71 199.90 233.87 259.08 276.30 290.29 312.00 336.37 369.03 468.09 493.68 398.94 330.01 291.70 287.43 270.61 260.79 254.93

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.

174

2016 INVESTMENT COMPANY FACT BOOK

World $564.75 444.47 369.37 535.05 716.20 955.73 1,360.45 1,718.57 916.34 1,307.98 1,542.70 1,357.59 1,614.10 2,035.87 2,081.15 2,102.37

Equity funds

Total return $1,935.78 1,842.69 1,507.51 2,077.18 2,477.81 2,696.90 3,152.78 3,275.05 1,930.13 2,478.92 2,807.69 2,678.41 3,007.29 4,003.72 4,379.00 4,203.07

Hybrid funds $360.92 358.03 335.28 447.57 552.25 621.48 731.50 821.52 562.26 717.58 842.20 883.98 1,034.06 1,285.01 1,376.59 1,336.58

Investment grade $245.69 311.29 405.94 473.59 518.25 570.10 640.32 760.34 736.40 1,050.03 1,241.29 1,365.08 1,570.03 1,448.87 1,522.03 1,512.51

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

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation $1,433.95 1,105.24 765.54 1,041.14 1,148.56 1,232.82 1,319.36 1,419.60 808.69 1,085.64 1,246.24 1,176.99 1,317.35 1,723.13 1,854.17 1,842.81

Billions of dollars, year-end

High yield $109.94 109.20 108.11 158.99 167.89 159.36 175.73 175.96 118.23 198.06 243.48 271.18 341.92 418.53 377.27 325.62

World $32.98 31.75 34.12 43.97 52.63 59.95 80.90 110.01 105.65 158.73 246.41 294.42 369.02 431.37 466.89 431.52

Government Multisector $124.87 $32.10 154.14 36.57 218.98 43.10 197.99 50.31 176.61 55.67 167.34 61.93 153.15 80.42 158.19 101.01 188.04 84.86 210.31 130.99 225.43 160.46 242.09 174.13 298.28 231.28 239.42 247.80 253.88 273.17 265.85 283.46

Bond funds

Total Net Assets of the Mutual Fund Industry by Composite Investment Objective

TABLE 4

State muni $131.92 139.78 152.72 149.26 144.09 147.46 154.42 155.94 135.09 159.26 156.16 158.89 177.53 144.82 156.16 159.84

National muni $146.49 156.44 177.41 187.05 184.15 191.50 210.67 218.21 202.70 299.24 317.80 338.64 402.64 354.47 410.32 433.57

Taxable Tax-exempt $1,611.38 $233.87 2,026.23 259.08 1,988.78 276.30 1,749.73 290.29 1,589.70 312.00 1,690.45 336.37 1,969.42 369.03 2,617.67 468.09 3,338.56 493.68 2,916.96 398.94 2,473.51 330.01 2,399.25 291.70 2,405.74 287.43 2,447.20 270.61 2,463.85 260.79 2,499.81 254.93

Money market funds

DATA SECTION 1

MUTUAL FUND TOTALS

175

DATA SECTION 1

TABLE 5

Number of Funds of the Mutual Fund Industry Year-end

Long-term funds Year 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Total 361 392 410 421 431 426 452 477 505 526 564 665 857 1,026

Equity 323 350 364 366 343 314 302 296 294 289 288 306 340 396

Bond and income 38 42 46 55 73 76 102 131 150 159 170 180 199 257

Money market funds – – – – 15 36 48 50 61 78 106 179 318 373

Long-term funds Equity Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total 1,243 1,528 1,835 2,312 2,737 2,935 3,079 3,403 3,824 4,534 5,325 5,725 6,248 6,684 7,314 7,791 8,155 8,305 8,243 8,127 8,045 7,977 8,123 8,041 8,040 7,666 7,555 7,588 7,590 7,715 7,928 8,116

Domestic 430 519 621 743 897 941 944 985 1,086 1,280 1,463 1,611 1,902 2,183 2,622 3,004 3,315 3,610 3,714 3,659 3,651 3,659 3,748 3,678 3,655 3,419 3,321 3,259 3,217 3,193 3,238 3,277

World 29 43 57 81 109 128 155 206 239 306 423 528 668 768 890 949 1,055 1,085 1,018 929 887 912 995 1,060 1,140 1,172 1,194 1,266 1,279 1,345 1,410 1,487

Bond Hybrid 89 103 121 164 179 189 192 211 234 281 360 411 465 500 525 531 508 473 458 474 472 481 500 496 511 481 495 520 564 606 666 717

Taxable 159 229 302 415 522 561 584 658 773 951 1,104 1,167 1,244 1,287 1,351 1,375 1,367 1,308 1,295 1,313 1,324 1,315 1,320 1,326 1,311 1,291 1,310 1,348 1,393 1,456 1,530 1,581

Money market funds

Municipal 111 174 247 366 420 443 463 523 628 796 1,012 1,011 981 933 900 887 871 814 770 779 767 740 713 676 640 599 583 563 557 560 557 573

Taxable 331 350 360 389 433 470 505 552 585 627 649 676 669 685 687 704 704 690 677 660 639 593 573 545 534 476 442 431 400 382 364 336

Tax-exempt 94 110 127 154 177 203 236 268 279 293 314 321 319 328 339 341 335 325 311 313 305 277 274 260 249 228 210 201 180 173 163 145

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.

176

2016 INVESTMENT COMPANY FACT BOOK

Capital appreciation 1,555 1,723 1,729 1,680 1,650 1,631 1,669 1,577 1,555 1,441 1,391 1,356 1,341 1,325 1,328 1,345

World 1,055 1,085 1,018 929 887 912 995 1,060 1,140 1,172 1,194 1,266 1,279 1,345 1,410 1,487

Equity funds

Total return 1,760 1,887 1,985 1,979 2,001 2,028 2,079 2,101 2,100 1,978 1,930 1,903 1,876 1,868 1,910 1,932

Hybrid funds 508 473 458 474 472 481 500 496 511 481 495 520 564 606 666 717

Investment grade 575 557 575 601 614 609 594 605 595 571 583 579 580 593 604 622

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

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

High yield 219 224 212 212 217 228 221 223 216 207 210 211 218 230 240 240

World 155 140 126 121 122 123 139 151 161 170 183 217 255 290 348 371

Government Multisector 323 95 296 91 284 98 281 98 275 96 262 93 256 110 243 104 236 103 237 106 229 105 223 118 216 124 214 129 199 139 192 156

Bond funds

Number of Funds of the Mutual Fund Industry by Composite Investment Objective

TABLE 6

State muni 589 550 515 523 513 498 478 448 415 377 361 346 336 331 322 319

National muni 282 264 255 256 254 242 235 228 225 222 222 217 221 229 235 254

Taxable 704 690 677 660 639 593 573 545 534 476 442 431 400 382 364 336

Tax-exempt 335 325 311 313 305 277 274 260 249 228 210 201 180 173 163 145

Money market funds

DATA SECTION 1

MUTUAL FUND TOTALS

177

DATA SECTION 1

TABLE 7

Number of Share Classes of the Mutual Fund Industry Year-end

Long-term funds Equity Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total 1,243 1,528 1,835 2,312 2,737 2,935 3,177 3,587 4,208 5,562 7,697 9,007 10,352 12,002 13,720 15,262 16,738 18,022 18,982 19,320 20,041 20,554 21,264 21,638 22,263 21,651 21,911 22,283 22,637 23,389 24,227 25,038

Domestic 430 519 621 743 897 941 962 1,021 1,189 1,560 2,026 2,442 3,056 3,860 4,872 5,818 6,725 7,738 8,427 8,546 9,002 9,259 9,641 9,706 9,881 9,342 9,201 9,173 9,143 9,220 9,422 9,640

World 29 43 57 81 109 128 166 227 263 385 630 845 1,155 1,449 1,770 1,968 2,299 2,511 2,515 2,369 2,357 2,501 2,775 3,030 3,386 3,550 3,715 3,949 4,042 4,262 4,532 4,776

Bond Hybrid 89 103 121 164 179 189 199 223 257 347 515 634 749 873 964 1,026 1,007 994 1,030 1,112 1,202 1,344 1,355 1,354 1,424 1,374 1,450 1,562 1,693 1,868 2,028 2,200

Taxable 159 229 302 415 522 561 598 687 877 1,207 1,605 1,844 2,050 2,293 2,532 2,722 2,821 2,874 3,065 3,222 3,377 3,427 3,542 3,640 3,753 3,782 3,990 4,150 4,438 4,720 4,996 5,222

Money market funds

Municipal 111 174 247 366 420 443 490 558 708 1,054 1,660 1,862 1,889 1,978 1,955 1,998 2,031 1,957 1,939 2,040 2,050 1,992 1,938 1,893 1,829 1,757 1,774 1,719 1,698 1,748 1,743 1,773

Taxable 331 350 360 389 433 470 522 591 616 672 858 953 1,005 1,075 1,137 1,230 1,331 1,405 1,463 1,462 1,477 1,464 1,454 1,447 1,443 1,330 1,281 1,255 1,174 1,141 1,100 1,056

Tax-exempt 94 110 127 154 177 203 240 280 298 337 403 427 448 474 490 500 524 543 543 569 576 567 559 568 547 516 500 475 449 430 406 371

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

178

2016 INVESTMENT COMPANY FACT BOOK

Capital appreciation 3,232 3,770 3,974 3,950 4,068 4,092 4,245 4,158 4,176 3,925 3,832 3,778 3,763 3,762 3,788 3,866

World 2,299 2,511 2,515 2,369 2,357 2,501 2,775 3,030 3,386 3,550 3,715 3,949 4,042 4,262 4,532 4,776

Equity funds

Total return 3,493 3,968 4,453 4,596 4,934 5,167 5,396 5,548 5,705 5,417 5,369 5,395 5,380 5,458 5,634 5,774

Hybrid funds 1,007 994 1,030 1,112 1,202 1,344 1,355 1,354 1,424 1,374 1,450 1,562 1,693 1,868 2,028 2,200

Investment grade 1,141 1,190 1,340 1,461 1,551 1,574 1,604 1,655 1,660 1,629 1,707 1,721 1,796 1,844 1,874 1,950

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

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

High yield 490 524 528 538 571 612 623 661 680 660 690 704 744 796 833 850

World 311 292 291 291 302 315 367 413 491 544 615 744 892 1,044 1,252 1,335

Government Multisector 679 200 661 207 676 230 703 229 716 237 687 239 666 282 630 281 624 298 633 316 652 326 620 361 626 380 631 405 601 436 592 495

Bond funds

Number of Share Classes of the Mutual Fund Industry by Composite Investment Objective State muni 1,393 1,325 1,286 1,333 1,333 1,306 1,258 1,220 1,151 1,069 1,065 1,029 1,002 1,010 990 976

National muni 638 632 653 707 717 686 680 673 678 688 709 690 696 738 753 797

Taxable 1,331 1,405 1,463 1,462 1,477 1,464 1,454 1,447 1,443 1,330 1,281 1,255 1,174 1,141 1,100 1,056

Tax-exempt 524 543 543 569 576 567 559 568 547 516 500 475 449 430 406 371

Money market funds

TABLE 8

DATA SECTION 1

MUTUAL FUND TOTALS

179

180

2016 INVESTMENT COMPANY FACT BOOK

Total $59,014 76,092 100,581 131,438 130,586 142,540 146,908 151,767 155,749 146,940 143,066 141,185 158,664 213,756 253,382 275,932 297,236 312,371 184,175 222,894 237,790 242,387 263,618 279,287 289,191 260,611

Domestic $10,791 13,109 14,581 15,462 16,018 18,078 19,830 20,536 22,529 24,696 24,557 22,309 26,596 42,987 63,732 77,090 88,013 87,869 45,753 52,940 60,461 62,414 68,461 81,757 88,962 72,055

Domestic taxable $16,820 19,403 24,632 30,909 26,604 28,678 28,418 28,315 34,127 30,888 28,581 26,559 25,643 55,428 63,890 63,935 67,962 62,571 33,673 44,126 48,985 48,009 53,638 58,489 56,820 51,672

Domestic municipal $16,482 29,519 45,593 60,100 56,035 60,318 59,540 61,992 63,628 64,513 68,266 74,467 90,024 94,060 94,841 94,563 94,526 88,920 67,334 77,677 77,140 84,100 90,594 82,876 90,164 89,465

Bond funds Global/ International $9,170 7,947 8,674 12,501 10,425 11,698 12,046 11,912 10,454 10,348 9,676 9,102 9,414 11,539 12,847 12,559 13,079 15,682 10,891 13,660 14,965 14,422 18,746 23,737 22,874 19,876

Note: Components may not add to the total because of rounding. Totals are inclusive of preferred share classes.

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global/ International $5,751 6,115 7,100 12,466 21,505 23,769 27,074 29,011 25,011 16,494 11,986 8,748 6,988 9,743 18,072 27,784 33,657 57,329 26,525 34,489 36,239 33,441 32,179 32,429 30,370 27,542

Equity funds

Millions of dollars, year-end

Total assets

Closed-End Funds: Total Assets and Number of Funds by Type of Fund

TABLE 9

Total 248 280 372 494 510 499 496 486 491 511 481 489 543 581 618 634 645 662 642 627 624 632 602 599 568 558

Domestic 41 40 43 48 50 49 50 45 44 49 53 52 63 75 95 120 128 136 128 117 117 125 125 131 126 121

Global/ International 51 52 61 70 86 91 91 89 83 74 69 64 59 55 61 71 74 92 93 91 87 87 86 85 84 84

Equity funds Domestic taxable 85 86 99 120 123 119 118 115 123 117 109 108 105 127 137 132 134 131 128 127 130 132 131 132 124 126

Number of funds Year-end Domestic municipal 53 87 149 227 219 207 205 205 211 241 220 238 291 297 295 280 276 269 260 260 258 256 223 210 194 188

Bond funds

DATA SECTION 2

Global/ International 18 15 20 29 32 33 32 32 30 30 30 27 25 27 30 31 33 34 33 32 32 32 37 41 40 39

TABLE 10

Closed-End Funds: Gross Issuance, Gross Redemptions, and Net Issuance by Type of Fund Millions of dollars, annual

Equity funds Year

Total

Domestic

Global/ International

Bond funds Domestic taxable

Domestic municipal

$0 1,032 1,028 124 334 2,695 0 317 358 2 2,081 6,428 1 51

Gross redemptions 2 2007 $2,717 2008 22,573 2009 6,875 2010 8,587 2011 8,972 2012 5,459 2013 3,335 2014 3,522 2015 2,463

$1,024 7,060 2,916 1,724 644 974 214 444 348

$105 1,832 639 55 209 420 649 124 419

$254 6,891 1,664 474 276 838 604 411 725

$1,313 6,089 1,627 6,335 7,843 3,226 1,864 2,330 816

$20 701 30 0 0 0 5 213 156

Net issuance 3 2007 $28,369 2008 -22,298 2009 -3,259 2010 5,430 2011 6,018 2012 11,385 2013 13,677 2014 4,891 2015 1,676

$4,949 -7,052 -2,366 1,995 3,206 2,840 4,097 3,819 148

$19,659 -1,687 -154 59 1,260 113 -543 494 1,043

$1,966 -6,770 -788 1,900 724 3,249 3,921 266 678

-$880 -6,089 -238 1,119 825 3,102 -220 523 -87

$2,675 -700 287 357 2 2,081 6,423 -212 -104

DATA SECTION 2

Gross issuance1 2002 $24,895 $9,191 $3 $2,309 $13,392 2003 40,810 11,187 50 25,587 2,954 2004 27,991 15,424 5,714 5,820 5 2005 21,388 12,559 6,628 2,046 31 2006 12,745 7,992 2,505 1,718 196 2007 31,086 5,973 19,764 2,221 433 2008 275 8 145 121 0 2009 3,615 549 485 876 1,389 2010 14,017 3,719 114 2,374 7,454 2011 14,990 3,850 1,469 1,000 8,669 2012 16,844 3,815 533 4,088 6,328 2013 17,012 4,311 106 4,525 1,643 2014 8,413 4,263 619 677 2,854 2015 4,140 496 1,461 1,403 728

Global/ International

1 Gross

issuance of shares is the value of net proceeds from underwritings, additional offerings, and other issuance. Data are not available prior to 2002. 2 Gross redemptions of shares is the value of share repurchases and fund liquidations. Data are not available prior to 2007. 3 Net issuance of shares is the dollar value of gross issuance minus gross redemptions. A positive number indicates that gross issuance exceeded gross redemptions. A negative number indicates that gross redemptions exceeded gross issuance. Data are not available prior to 2007. Note: Components may not add to the total because of rounding. Totals are inclusive of preferred share classes.

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

181

182

2016 INVESTMENT COMPANY FACT BOOK

Total $464 424 1,052 2,411 6,707 15,568 33,873 65,585 82,993 102,143 150,983 227,540 300,820 422,550 608,422 531,288 777,128 991,989 1,048,134 1,337,112 1,674,616 1,974,377 2,100,443

Broad-based $464 424 1,052 2,159 6,200 14,058 29,374 60,529 74,752 86,985 120,430 163,730 186,832 232,487 300,930 266,161 304,044 372,377 400,696 509,338 761,701 935,652 965,123

Sector1 $484 2,507 3,015 5,224 5,919 11,901 20,315 28,975 43,655 64,117 58,374 82,053 103,807 108,548 135,378 202,706 267,523 267,356

Domestic equity

Equity Global/ International Commodities 2 $252 506 1,026 1,992 2,041 3,016 5,324 13,984 33,644 $1,335 65,210 4,798 111,194 14,699 179,702 28,906 113,684 35,728 209,315 74,528 276,622 101,081 245,114 109,176 328,521 120,016 398,834 64,042 414,805 56,974 474,640 49,317

Investment objective

Hybrid $119 132 169 322 377 656 1,469 3,047 3,738

Bond $3,915 4,667 8,516 15,004 20,514 34,648 57,209 107,018 137,781 184,222 243,203 245,862 296,376 340,270

Legal status

Index $464 424 1,052 2,411 6,707 15,568 33,873 65,585 82,993 102,143 150,983 226,205 296,022 407,850 579,517 495,314 701,586 888,198 934,216 1,206,974 1,596,691 1,901,331 2,024,438

Actively managed $245 1,014 2,736 5,049 10,257 14,055 16,508 27,534

1940 Act ETFs Non–1940 Act ETFs 3 $1,335 4,798 14,699 28,906 35,728 74,528 101,055 108,868 119,881 63,869 56,538 48,471

Funds of funds 4 $97 824 1,294 1,580 2,227 2,659 5,204 10,690

Memo

category includes funds both registered and not registered under the Investment Company Act of 1940. category includes funds—both registered and not registered under the Investment Company Act of 1940—that invest primarily in commodities, currencies, and futures. 3 The funds in this category are not registered under the Investment Company Act of 1940. 4 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

2 This

1 This

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, year-end

Exchange-Traded Funds: Total Net Assets by Type of Fund

TABLE 11

DATA SECTION 2

183

Total 1 1 2 19 19 29 30 80 102 113 119 152 204 359 629 728 797 923 1,134 1,194 1,294 1,411 1,594

Equity

Broad-based 1 1 2 2 2 3 4 29 34 34 39 60 81 133 197 204 222 243 287 274 292 316 360

Sector1 9 9 26 34 32 33 42 65 119 191 186 179 193 229 222 235 236 266

Domestic equity Global/ International Commodities 2 17 17 17 17 25 34 39 41 43 1 49 3 85 16 159 28 225 45 244 49 298 55 368 75 404 79 438 76 494 82 592 81

Investment objective

Hybrid 5 6 5 6 7 13 15 19 21

Bond 8 6 6 6 6 49 62 98 128 168 202 238 264 274 Index 1 1 2 19 19 29 30 80 102 113 119 151 201 343 601 670 727 844 1,028 1,070 1,158 1,228 1,387

Actively managed 13 21 25 33 44 61 111 134

1940 Act ETFs

Legal status

Non–1940 Act ETFs 3 1 3 16 28 45 49 54 73 80 75 72 73

category includes funds both registered and not registered under the Investment Company Act of 1940. category includes funds—both registered and not registered under the Investment Company Act of 1940—that invest primarily in commodities, currencies, and futures. funds in this category are not registered under the Investment Company Act of 1940. 4 Data for ETFs that invest primarily in other ETFs are excluded from the totals. Sources: Investment Company Institute and Strategic Insight Simfund

3 The

2 This

1 This

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

Exchange-Traded Funds: Number of Funds by Type of Fund

TABLE 12

DATA SECTION 2

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

Funds of funds 4 15 23 27 32 45 38 40 50

Memo

184

2016 INVESTMENT COMPANY FACT BOOK

Total $442 -28 443 1,108 3,466 6,195 11,929 42,508 31,012 45,302 15,810 56,375 56,729 73,995 150,617 177,220 116,469 117,982 117,642 185,394 179,885 240,785 230,919

Broad-based $442 -28 443 842 3,160 5,158 10,221 40,591 26,911 35,477 5,737 29,084 16,941 21,589 61,152 88,105 -11,842 28,317 34,653 57,739 99,470 102,335 49,705

Sector1 $484 1,596 1,033 2,735 2,304 3,587 6,514 6,719 9,780 18,122 30,296 14,329 10,187 9,682 14,307 34,434 40,593 13,371

Domestic equity

Equity Global/ International Commodities 2 $266 306 553 112 884 1,366 3,792 5,764 15,645 $1,353 23,455 2,859 28,423 8,475 48,842 9,062 25,243 10,567 39,599 28,410 41,527 8,155 24,250 2,940 51,896 8,889 62,807 -29,870 46,642 -1,420 109,668 2,118

Investment objective

Hybrid $122 58 15 144 72 246 849 1,629 1,110

Bond $3,729 721 3,778 6,756 5,729 13,318 22,952 45,958 29,652 46,045 52,318 12,195 51,007 54,949

Legal status

Index $442 -28 443 1,108 3,466 6,195 11,929 42,508 31,012 45,302 15,810 55,021 53,871 65,520 141,555 166,372 87,336 108,141 112,437 171,329 205,323 240,011 216,463

Actively managed $281 724 1,711 2,567 5,025 4,468 2,538 12,926

1940 Act ETFs Non–1940 Act ETFs 3 $1,353 2,859 8,475 9,062 10,567 28,410 8,129 2,639 9,041 -29,906 -1,764 1,530

Funds of funds 4 $107 237 433 389 510 1,180 2,423 5,778

Memo

includes funds both registered and not registered under the Investment Company Act of 1940. category includes funds—both registered and not registered under the Investment Company Act of 1940—that invest primarily in commodities, currencies, and futures. 3 The funds in this category are not registered under the Investment Company Act of 1940. 4 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

2 This

1 This category

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Exchange-Traded Funds: Net Issuance by Type of Fund

TABLE 13

DATA SECTION 2

Total trusts $105,390 102,828 97,925 87,574 73,682 73,125 72,204 84,761 93,943 91,970 74,161 49,249 36,016 35,826 37,267 40,894 49,662 53,040 28,543 38,336 50,567 59,931 71,725 86,504 101,136 94,127

Equity $4,192 4,940 6,484 8,494 9,285 14,019 22,922 40,747 56,413 62,128 48,060 26,467 14,651 19,024 23,201 28,634 38,809 43,295 20,080 24,774 34,112 40,638 51,905 70,850 85,887 80,417

Taxable debt Tax-free debt $9,456 $91,742 9,721 88,167 9,976 81,465 8,567 70,513 7,252 57,144 8,094 51,013 8,485 40,796 6,480 37,533 5,380 32,151 4,283 25,559 3,502 22,599 3,784 18,999 4,020 17,345 3,311 13,491 2,635 11,432 2,280 9,980 2,142 8,711 2,066 7,680 2,007 6,456 3,668 9,894 3,780 12,675 3,602 15,691 4,063 15,757 3,560 12,094 3,135 12,114 2,597 11,113

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

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, year-end

Total net assets Total trusts 12,131 12,388 13,598 13,740 13,310 12,979 11,764 11,593 10,966 10,414 10,072 9,295 8,303 7,233 6,499 6,019 5,907 6,030 5,984 6,049 5,971 6,043 5,787 5,552 5,381 5,188

Equity 171 168 230 258 306 301 378 563 872 1,081 1,554 1,500 1,247 1,206 1,166 1,251 1,566 1,964 2,175 2,145 2,212 2,395 2,426 2,428 2,501 2,609

Taxable debt Tax-free debt 722 11,238 678 11,542 745 12,623 679 12,803 568 12,436 578 12,100 591 10,795 513 10,517 414 9,680 409 8,924 369 8,149 324 7,471 366 6,690 320 5,707 295 5,038 304 4,464 319 4,022 327 3,739 343 3,466 438 3,466 491 3,268 512 3,136 553 2,808 580 2,544 593 2,287 587 1,992

Year-end

Number of trusts

Unit Investment Trusts: Total Net Assets, Number of Trusts, and New Deposits by Type of Trust

TABLE 14

Total trusts $7,489 8,195 8,909 9,359 8,915 11,264 21,662 38,546 47,675 52,046 43,649 19,049 11,600 12,731 17,125 22,598 29,057 35,836 23,590 22,293 30,936 36,026 43,404 55,628 65,529 65,949

Equity $495 900 1,771 3,206 3,265 6,743 18,316 35,855 45,947 50,629 42,570 16,927 9,131 10,071 14,559 21,526 28,185 35,101 22,335 16,159 25,003 31,900 40,012 53,719 63,991 64,582

Taxable debt Tax-free debt $1,349 $5,644 1,687 5,609 2,385 4,752 1,598 4,555 1,709 3,941 1,154 3,367 800 2,546 771 1,919 562 1,166 343 1,074 196 883 572 1,550 862 1,607 931 1,729 981 1,585 289 782 294 578 298 438 557 698 2,201 3,933 928 5,006 765 3,361 1,236 2,157 916 993 624 915 492 875

New deposits

Millions of dollars, annual

DATA SECTION 2

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

185

TABLE 15

Liquid Assets and Liquidity Ratio of Long-Term Mutual Funds Year-end

Liquidity ratio*

Liquid assets

DATA SECTION 3

Millions of dollars

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total $12,181 20,593 30,611 37,930 44,980 44,603 48,440 60,385 73,984 99,436 120,430 141,755 151,988 198,826 191,393 219,098 277,164 222,475 208,939 259,641 307,111 303,189 346,768 381,679 314,286 365,787 330,355 461,852 516,627 659,196 742,614 671,029

Equity funds $7,295 10,452 14,612 16,319 17,742 25,602 27,344 30,657 42,417 57,539 70,885 97,743 107,667 145,565 143,516 174,692 225,023 170,361 120,500 154,877 184,140 190,906 218,670 266,285 203,282 169,799 192,757 182,548 200,436 272,506 291,692 258,382

Hybrid funds $878 1,413 2,514 2,730 2,986 5,747 4,198 3,309 6,560 16,613 19,929 19,271 17,954 24,645 25,289 20,979 26,798 26,911 25,423 30,654 36,419 43,133 57,461 56,813 52,712 52,845 61,073 70,744 100,800 149,640 165,691 179,572

Percent

Bond funds $4,007 8,728 13,485 18,881 24,252 13,253 16,899 26,419 25,007 25,284 29,616 24,741 26,367 28,616 22,588 23,427 25,343 25,203 63,016 74,110 86,552 69,150 70,637 58,581 58,291 143,143 76,525 208,559 215,390 237,050 285,231 233,075

Total 8.9% 8.2 7.2 8.4 9.5 8.1 8.5 7.1 6.7 6.6 7.8 6.9 5.8 5.8 4.6 4.2 5.4 4.7 5.1 4.8 5.0 4.4 4.3 4.3 5.4 4.7 3.7 5.2 5.0 5.3 5.6 5.2

Equity funds 9.1% 9.4 9.5 9.3 9.4 10.4 11.4 7.6 8.3 7.8 8.3 7.8 6.2 6.1 4.8 4.3 5.7 5.0 4.6 4.2 4.2 3.9 3.7 4.2 5.6 3.5 3.4 3.5 3.4 3.5 3.5 3.2

Hybrid funds 7.9% 8.0 9.8 9.3 11.3 16.1 11.7 6.4 8.5 11.7 12.3 9.3 7.2 7.9 7.0 5.6 7.4 7.5 7.6 6.8 6.6 6.9 7.9 6.9 9.4 7.4 7.3 8.0 9.7 11.6 12.0 13.4

Bond funds 8.7% 7.1 5.5 7.6 9.5 4.9 5.8 6.7 5.0 4.1 5.6 4.1 4.1 3.9 2.7 2.9 3.1 2.7 5.5 5.9 6.7 5.1 4.7 3.5 3.7 6.5 3.0 7.3 6.4 7.2 8.2 6.8

* The 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.

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2016 INVESTMENT COMPANY FACT BOOK

World 7.7% 6.2 5.7 5.8 5.5 5.2 4.3 5.2 7.9 3.9 4.4 4.5 4.0 4.5 4.9 4.3

Equity funds

Total return 4.9% 4.8 4.1 4.1 4.2 3.7 3.7 3.6 4.2 2.8 2.9 2.8 2.9 3.0 2.9 2.6

Hybrid funds 7.4% 7.5 7.6 6.8 6.6 6.9 7.9 6.9 9.4 7.4 7.3 8.0 9.7 11.6 12.0 13.4

Investment grade 4.5% 3.3 10.7 9.7 8.9 6.5 6.9 2.3 1.1 6.8 0.3 7.2 5.4 6.9 7.5 4.7 High yield 9.1% 7.7 7.9 6.1 6.1 5.2 4.9 4.6 10.7 5.4 5.8 7.2 5.6 4.4 4.4 5.8

World -2.2% -3.7 -2.5 3.3 6.1 6.1 12.5 17.0 13.0 13.6 16.5 17.5 15.1 17.2 19.3 15.0

Government -2.8% -0.5 0.5 1.7 3.8 1.2 -4.1 -0.8 4.4 4.0 -2.5 0.9 2.8 1.0 2.5 3.2

Bond funds Multisector -2.2% 0.6 -1.0 7.1 7.5 6.2 2.2 2.8 3.7 6.6 2.7 5.2 6.9 7.0 8.0 9.4

State muni 3.1% 2.3 2.6 2.2 2.9 2.5 2.0 1.8 1.7 2.8 2.1 3.1 3.4 2.0 3.6 4.4

Note: The liquidity ratio is the ratio of liquid assets divided by total net assets at year-end. Data for funds that invest primarily in other mutual funds were excluded from the series.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation 6.1% 4.9 4.9 3.7 3.6 3.3 3.4 4.3 6.1 4.5 3.5 3.8 3.6 3.6 3.3 3.3

Percent, year-end

Liquidity Ratio of Long-Term Mutual Funds by Composite Investment Objective

TABLE 16

DATA SECTION 3

LONG-TERM MUTUAL FUNDS

187

National muni 3.5% 3.2 4.2 3.7 6.5 5.7 4.5 4.6 4.9 6.0 5.2 6.6 6.2 6.5 7.6 8.2

TABLE 17

Net New Cash Flow of Long-Term Mutual Funds

DATA SECTION 3

Millions of dollars, annual

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total $19,194 73,490 129,991 29,776 -23,119 8,731 21,211 106,213 171,696 242,049 75,160 122,208 231,874 272,030 241,796 169,780 228,874 129,188 120,583 215,884 209,890 192,017 227,078 224,321 -211,197 393,030 243,540 28,197 199,664 162,136 97,678 -123,136

Equity funds $4,336 6,643 20,386 19,231 -14,948 6,774 12,915 39,888 78,983 127,261 114,525 124,392 216,937 227,107 156,875 187,565 315,711 33,439 -29,326 144,055 171,937 123,967 147,773 73,328 -215,710 2,000 -24,414 -129,241 -152,680 159,547 25,215 -76,850

Hybrid funds $1,801 3,720 6,988 3,748 -3,684 3,183 1,463 7,067 21,725 42,619 21,998 3,738 11,796 15,757 10,265 -13,018 -36,722 7,285 8,043 39,080 53,056 42,754 19,857 40,384 -25,525 19,792 35,612 39,771 46,118 73,754 28,998 -20,790

Bond funds $13,058 63,127 102,618 6,797 -4,488 -1,226 6,833 59,258 70,989 72,169 -61,362 -5,922 3,142 29,166 74,656 -4,767 -50,115 88,463 141,865 32,750 -15,102 25,295 59,448 110,609 30,039 371,238 232,342 117,667 306,226 -71,165 43,465 -25,496

Note: Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. Data for funds that invest primarily in other mutual funds were excluded from the series. Components many not add to the total because of rounding.

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2016 INVESTMENT COMPANY FACT BOOK

TABLE 18

Net New Cash Flow and Components of Net New Cash Flow of Equity Mutual Funds Millions of dollars, annual

Sales New + exchange $28,705 40,608 87,997 139,596 68,827 89,345 104,334 146,618 201,720 307,356 366,659 433,853 674,323 880,286 1,065,197 1,410,846 1,972,208 1,329,827 1,214,146 1,074,175 1,096,540 1,192,654 1,417,077 1,729,376 1,526,770 1,194,430 1,406,727 1,493,209 1,449,651 1,864,277 2,008,790 2,009,473

New2 $16,586 25,046 50,774 65,093 25,641 46,817 62,872 90,192 134,309 213,639 252,887 282,937 442,372 579,064 699,554 918,600 1,320,049 953,619 894,047 837,496 926,961 1,017,225 1,214,420 1,506,720 1,331,755 1,032,587 1,236,968 1,323,075 1,260,222 1,641,158 1,797,555 1,792,535

Redemptions Exchange 3 $12,119 15,562 37,224 74,502 43,186 42,527 41,462 56,427 67,411 93,717 113,772 150,915 231,951 301,222 365,643 492,245 652,159 376,208 320,099 236,679 169,579 175,428 202,658 222,656 195,014 161,843 169,759 170,134 189,428 223,119 211,235 216,938

Regular + exchange $24,369 33,965 67,612 120,365 83,774 82,571 91,419 106,730 122,738 180,095 252,134 309,461 457,385 653,180 908,322 1,223,281 1,656,497 1,296,387 1,243,471 930,120 924,603 1,068,686 1,269,304 1,656,048 1,742,480 1,192,430 1,431,140 1,622,450 1,602,331 1,704,730 1,983,576 2,086,324

Regular4 $10,669 17,558 26,051 38,601 33,247 37,229 44,487 53,394 61,465 91,944 141,097 170,402 240,531 362,022 534,256 744,145 1,032,153 891,802 875,677 707,565 758,902 878,158 1,047,381 1,389,144 1,467,491 1,012,070 1,239,214 1,418,037 1,382,128 1,496,822 1,773,315 1,874,220

Exchange5 $13,700 16,406 41,561 81,764 50,528 45,342 46,931 53,336 61,272 88,151 111,037 139,059 216,854 291,158 374,065 479,136 624,345 404,586 367,794 222,555 165,701 190,528 221,923 266,905 274,989 180,360 191,926 204,413 220,202 207,908 210,260 212,104

DATA SECTION 3

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net new cash flow1 $4,336 6,643 20,386 19,231 -14,948 6,774 12,915 39,888 78,983 127,260 114,525 124,392 216,937 227,106 156,875 187,565 315,711 33,439 -29,326 144,055 171,937 123,967 147,773 73,328 -215,710 2,000 -24,414 -129,241 -152,680 159,547 25,215 -76,850

1 Net

new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 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. 2 New

LONG-TERM MUTUAL FUNDS

189

TABLE 19

Net New Cash Flow and Components of Net New Cash Flow of Hybrid Mutual Funds Millions of dollars, annual

DATA SECTION 3

Sales Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net new cash flow1 $1,801 3,720 6,988 3,748 -3,684 3,183 1,463 7,067 21,725 42,619 21,998 3,738 11,795 15,757 10,265 -13,018 -36,722 7,285 8,043 39,079 53,055 42,754 19,857 40,384 -25,525 19,792 35,612 39,771 46,118 73,754 28,998 -20,790

New + exchange $4,118 7,502 13,535 14,948 6,259 11,139 9,671 16,860 32,772 60,610 58,541 43,024 56,783 68,347 82,691 81,917 70,445 83,546 93,685 115,929 143,463 144,267 146,088 206,415 181,437 174,217 205,830 264,070 266,743 338,257 321,418 297,039

New2 $3,842 6,976 12,342 12,419 4,601 9,334 7,989 13,754 26,463 49,526 49,043 35,385 47,436 55,264 67,294 67,617 56,973 65,634 75,664 96,811 125,438 126,616 127,532 183,482 155,076 150,048 181,871 234,481 240,075 301,452 289,915 265,863

Redemptions Exchange 3 $276 526 1,194 2,528 1,658 1,805 1,682 3,106 6,309 11,083 9,498 7,640 9,347 13,084 15,397 14,300 13,473 17,912 18,021 19,117 18,025 17,651 18,555 22,933 26,361 24,169 23,959 29,589 26,669 36,805 31,503 31,176

Regular + exchange $2,318 3,782 6,548 11,200 9,943 7,956 8,208 9,793 11,047 17,990 36,544 39,286 44,988 52,590 72,426 94,934 107,167 76,260 85,642 76,849 90,407 101,513 126,231 166,031 206,962 154,425 170,218 224,298 220,625 264,503 292,420 317,829

Regular4 $2,017 3,161 5,162 7,848 7,521 5,780 5,600 7,011 7,209 11,735 25,298 27,807 31,413 38,265 53,353 69,790 77,219 58,850 67,407 63,329 77,520 86,199 106,066 144,066 165,396 127,179 146,546 191,199 196,018 233,452 265,208 283,057

Exchange5 $301 621 1,386 3,353 2,422 2,176 2,608 2,782 3,838 6,256 11,245 11,479 13,575 14,325 19,073 25,145 29,948 17,410 18,234 13,520 12,887 15,314 20,165 21,965 41,566 27,246 23,672 33,099 24,607 31,052 27,212 34,771

1 Net

new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 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. 2 New

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2016 INVESTMENT COMPANY FACT BOOK

TABLE 20

Net New Cash Flow and Components of Net New Cash Flow of Bond Mutual Funds Millions of dollars, annual

Sales New + exchange $25,554 83,359 158,874 123,528 72,174 71,770 80,659 141,674 217,863 262,300 186,908 166,437 203,343 242,309 314,429 299,198 250,918 394,211 515,028 520,683 395,451 402,734 446,377 592,760 709,541 1,006,675 1,089,698 1,103,665 1,246,704 1,307,931 1,278,071 1,196,485

New2 $20,774 74,485 138,240 93,725 47,378 48,602 57,106 108,095 171,991 208,605 131,351 110,451 137,886 176,275 230,934 217,431 187,188 301,477 402,020 428,553 340,549 351,116 391,126 506,964 580,855 856,834 964,459 976,073 1,121,190 1,158,795 1,174,003 1,090,043

Redemptions Exchange 3 $4,780 8,874 20,634 29,803 24,796 23,168 23,552 33,580 45,872 53,696 55,556 55,986 65,457 66,034 83,495 81,767 63,730 92,733 113,009 92,130 54,902 51,617 55,251 85,796 128,686 149,841 125,239 127,592 125,514 149,136 104,068 106,442

Regular + exchange $12,497 20,232 56,256 116,731 76,662 72,996 73,826 82,416 146,874 190,131 248,270 172,359 200,201 213,143 239,773 303,965 301,033 305,748 373,163 487,934 410,554 377,438 386,929 482,151 679,503 635,438 857,356 985,999 940,478 1,379,096 1,234,606 1,221,980

Regular4 $7,344 13,094 35,776 69,627 51,558 48,517 47,978 56,177 96,628 127,294 162,823 114,686 125,486 140,906 160,071 207,254 220,868 226,197 285,070 376,840 341,466 321,639 329,462 410,366 582,615 525,214 742,628 870,097 838,189 1,190,730 1,137,777 1,119,594

Exchange5 $5,152 7,137 20,480 47,104 25,103 24,480 25,848 26,239 50,246 62,838 85,448 57,673 74,715 72,237 79,702 96,711 80,165 79,551 88,093 111,094 69,088 55,799 57,467 71,785 96,888 110,224 114,728 115,901 102,289 188,366 96,829 102,386

DATA SECTION 3

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net new cash flow1 $13,058 63,127 102,618 6,797 -4,488 -1,226 6,833 59,258 70,989 72,169 -61,362 -5,922 3,141 29,166 74,656 -4,767 -50,115 88,463 141,865 32,750 -15,102 25,295 59,448 110,609 30,039 371,238 232,342 117,667 306,226 -71,165 43,465 -25,496

1 Net

new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 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. 2 New

LONG-TERM MUTUAL FUNDS

191

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2016 INVESTMENT COMPANY FACT BOOK

World $58,195 -23,206 -4,451 24,361 71,583 106,918 150,935 141,788 -66,686 29,633 56,679 4,060 6,420 141,409 85,338 93,887

Equity funds

Total return -$4,574 79,425 27,513 92,569 111,851 42,408 23,680 -25,399 -101,126 -20,405 -54,517 -89,121 -120,346 21,111 -18,993 -116,073

Hybrid funds -$36,722 7,285 8,043 39,079 53,055 42,754 19,857 40,384 -25,525 19,792 35,612 39,771 46,118 73,754 28,998 -20,790

Investment grade $5,460 49,253 64,670 31,835 22,382 36,732 36,993 76,108 9,449 202,341 111,385 51,242 104,922 -97,530 9,303 -1,096 High yield -$15,376 880 2,953 21,945 -3,045 -13,529 3,044 -4,822 -6,360 22,384 19,335 21,587 34,257 55,641 -44,275 -36,987

World -$4,631 -1,151 -71 4,029 4,310 6,404 10,936 21,132 6,087 32,668 70,076 44,468 42,969 66,239 24,417 -23,568

Government -$16,663 24,769 53,048 -22,124 -26,259 -14,211 -17,834 -2,242 20,600 18,950 4,059 3,393 33,743 -51,214 5,752 12,431

Bond funds Multisector -$4,439 2,436 4,380 3,903 2,857 5,188 11,204 9,454 -7,554 24,515 15,826 8,593 40,162 14,194 20,280 8,932

State muni -$5,456 6,293 5,337 -8,309 -7,939 1,232 3,876 3,358 -2,302 6,084 -2,838 -9,890 8,539 -22,420 -1,064 682

National muni -$9,010 5,983 11,549 1,471 -7,410 3,480 11,229 7,621 10,119 64,295 14,499 -1,726 41,633 -36,074 29,051 14,109

Note: Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. Data for funds that invest primarily in other mutual funds were excluded from the series.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation $262,090 -22,779 -52,387 27,126 -11,497 -25,359 -26,842 -43,061 -47,898 -7,228 -26,576 -44,180 -38,754 -2,973 -41,131 -54,664

Millions of dollars, annual

Net New Cash Flow of Long-Term Mutual Funds by Composite Investment Objective

TABLE 21

DATA SECTION 3

World $342,511 251,663 245,152 205,236 184,371 239,620 354,878 479,180 374,604 284,663 379,531 398,368 362,821 511,173 542,981 583,423

Equity funds

Total return $403,217 395,407 398,839 381,662 474,563 514,063 557,548 659,267 617,076 474,610 548,138 584,494 561,838 734,534 829,596 786,628

Hybrid funds $56,973 65,634 75,664 96,811 125,438 126,616 127,532 183,482 155,076 150,048 181,871 234,481 240,075 301,452 289,915 265,863

Investment grade $79,200 127,711 172,587 186,661 165,644 171,630 183,990 247,214 277,177 426,743 450,179 448,943 489,090 466,426 492,785 466,966 High yield $27,405 36,277 39,665 65,577 48,346 42,175 45,724 55,721 47,425 70,370 96,163 128,890 124,107 172,527 147,372 124,283

World $8,267 8,948 10,920 18,946 18,132 23,786 29,025 45,546 53,469 69,340 129,602 138,829 132,763 193,007 194,861 154,000

Government $24,359 58,987 93,874 71,167 38,512 32,063 29,690 34,593 64,527 90,702 79,464 72,240 109,826 74,507 70,546 80,030

Bond funds Multisector $6,787 12,245 15,446 20,968 18,548 21,172 30,147 39,718 37,711 58,029 71,271 76,873 106,435 116,833 128,592 126,728

State muni $16,989 25,028 26,360 20,546 16,820 21,959 25,566 29,590 30,562 28,386 28,530 19,797 30,912 23,833 22,423 24,301

National muni $24,180 32,282 43,168 44,688 34,548 38,331 46,985 54,582 69,983 113,264 109,250 90,501 128,058 111,661 117,425 113,737

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

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation $574,322 306,550 250,056 250,597 268,027 263,542 301,994 368,273 340,076 273,313 309,299 340,212 335,564 395,452 424,978 422,484

Millions of dollars, annual

New Sales of Long-Term Mutual Funds by Composite Investment Objective

TABLE 22

DATA SECTION 3

LONG-TERM MUTUAL FUNDS

193

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2016 INVESTMENT COMPANY FACT BOOK

World $169,388 85,824 71,084 41,777 27,630 38,396 56,926 68,791 49,364 47,478 55,916 40,005 47,470 44,075 48,136 55,765

Equity funds

Total return $139,153 114,364 104,741 100,330 84,373 81,246 81,396 92,981 87,005 69,472 71,903 81,735 96,847 110,829 101,701 96,943

Hybrid funds $13,473 17,912 18,021 19,117 18,025 17,651 18,555 22,933 26,361 24,169 23,959 29,589 26,669 36,805 31,503 31,176

Investment grade $16,756 32,627 39,454 33,917 23,666 20,833 21,896 41,587 50,417 76,507 58,253 59,218 54,575 52,690 46,085 41,338 High yield $10,298 11,378 11,201 17,110 8,944 7,270 7,295 7,931 7,414 13,182 13,068 14,814 13,407 18,967 12,167 14,497

World $3,011 2,057 2,373 3,528 2,056 2,780 2,740 4,630 8,506 7,976 9,482 10,801 9,807 26,824 10,140 13,956

Government $15,829 24,779 37,280 18,355 7,023 6,575 5,972 10,226 27,495 18,336 14,512 14,323 14,912 13,320 7,231 9,151

Bond funds Multisector $1,662 2,860 3,474 4,713 4,330 4,742 7,027 5,036 10,048 8,641 10,792 10,756 12,957 10,305 9,738 9,379

State muni $5,304 5,348 5,625 4,288 2,750 2,983 3,450 5,706 7,039 5,161 3,852 3,736 3,685 4,900 3,600 3,899

National muni $10,870 13,686 13,602 10,218 6,135 6,435 6,869 10,680 17,767 20,037 15,280 13,944 16,171 22,131 15,107 14,222

Note: Exchange sales are the dollar value of mutual fund shares switched into funds within the same fund group. Data for funds that invest primarily in other mutual funds were excluded from the series.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation $343,618 176,020 144,274 94,572 57,575 55,786 64,336 60,884 58,645 44,893 41,940 48,394 45,111 68,215 61,399 64,230

Millions of dollars, annual

Exchange Sales of Long-Term Mutual Funds by Composite Investment Objective

TABLE 23

DATA SECTION 3

Capital appreciation $367,939 307,031 276,869 222,877 269,656 274,036 313,742 393,843 375,619 273,761 329,283 376,689 367,172 401,109 464,597 480,174

World $288,253 264,414 243,479 183,743 122,228 148,065 223,271 347,697 413,224 254,635 317,496 383,010 354,562 374,159 459,184 500,167

Total return $375,961 320,356 355,328 300,945 367,018 456,057 510,369 647,604 678,648 483,675 592,435 658,338 660,394 721,554 849,534 893,879

Hybrid funds $77,219 58,850 67,407 63,329 77,520 86,199 106,066 144,066 165,396 127,179 146,546 191,199 196,018 233,452 265,208 283,057

Investment grade $71,781 87,986 117,197 150,032 141,777 136,146 146,821 186,051 281,433 248,411 347,313 406,914 393,653 529,454 490,355 467,019 High yield $37,560 34,381 36,207 47,355 49,051 52,217 42,462 57,163 51,012 51,338 79,906 108,257 92,111 121,666 186,425 156,729

World $11,447 9,538 11,383 15,501 13,819 18,358 18,602 26,374 49,488 40,278 62,812 95,480 92,006 141,365 170,248 181,379

Government $35,865 37,939 53,918 79,437 58,824 43,913 43,975 38,850 59,781 69,920 74,239 69,572 77,394 117,158 63,799 68,938

Bond funds Multisector $10,431 10,367 12,043 17,372 15,552 16,059 19,707 29,139 45,632 36,084 55,858 69,333 70,412 101,524 110,865 118,959

State muni $21,877 18,584 20,889 25,700 22,817 20,457 21,692 25,838 32,200 22,762 29,101 28,412 22,815 40,542 23,917 23,870

National muni $31,908 27,401 33,434 41,443 39,625 34,488 36,205 46,949 63,070 56,421 93,398 92,128 89,798 139,022 92,168 102,699

Note: Redemptions are the dollar value of shareholder liquidation of mutual fund shares. Data for funds that invest primarily in other mutual funds were excluded from the series.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Equity funds

Millions of dollars, annual

Redemptions of Long-Term Mutual Funds by Composite Investment Objective

TABLE 24

DATA SECTION 3

LONG-TERM MUTUAL FUNDS

195

196

2016 INVESTMENT COMPANY FACT BOOK

World $165,451 96,279 77,208 38,910 18,190 23,033 37,597 58,486 77,430 47,874 61,271 51,303 49,310 39,680 46,595 45,134

Equity funds

Total return $170,983 109,990 120,738 88,479 80,067 96,844 104,895 130,043 126,558 80,812 82,123 97,012 118,636 102,697 100,755 105,765

Hybrid funds $29,948 17,410 18,234 13,520 12,887 15,314 20,165 21,965 41,566 27,246 23,672 33,099 24,607 31,052 27,212 34,771

Investment grade $18,715 23,098 30,174 38,711 25,150 19,585 22,073 26,641 36,712 52,499 49,734 50,005 45,090 87,193 39,212 42,380 High yield $15,519 12,393 11,706 13,387 11,284 10,757 7,513 11,311 10,187 9,830 9,990 13,860 11,146 14,188 17,388 19,037

World $4,463 2,618 1,981 2,945 2,059 1,804 2,227 2,670 6,401 4,371 6,195 9,681 7,594 12,228 10,335 10,144

Government $20,986 21,058 24,188 32,209 12,969 8,936 9,521 8,210 11,642 20,168 15,678 13,597 13,601 21,882 8,225 7,812

Bond funds Multisector $2,457 2,301 2,498 4,407 4,468 4,666 6,264 6,161 9,682 6,071 10,379 9,703 8,817 11,420 7,186 8,215

State muni $5,872 5,499 5,758 7,443 4,692 3,253 3,449 6,099 7,703 4,702 6,119 5,011 3,243 10,611 3,170 3,648

National muni $12,153 12,583 11,787 11,992 8,467 6,798 6,420 10,692 14,562 12,584 16,632 14,043 12,797 30,844 11,313 11,150

Note: Exchange redemptions are the dollar value of mutual fund shares switched out of funds and into other funds within the same fund group. Data for funds that invest primarily in other mutual funds were excluded from the series.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital appreciation $287,910 198,317 169,848 95,166 67,443 70,651 79,431 78,376 71,000 51,674 48,532 56,097 52,256 65,531 62,910 61,204

Millions of dollars, annual

Exchange Redemptions of Long-Term Mutual Funds by Composite Investment Objective

TABLE 25

DATA SECTION 3

TABLE 26

Annual Redemption Rates of Long-Term Mutual Funds Percent

Broad redemption rate2

Narrow redemption rate1 Total 17.4% 19.8 26.5 20.0 17.9 17.5 16.4 17.0 17.8 21.6 17.4 17.0 17.9 19.7 21.7 25.7 24.0 27.9 24.2 20.4 19.7 19.9 22.9 30.1 24.5 25.3 27.6 25.0 25.7 24.9 25.2

Equity funds 18.4% 19.6 23.4 18.2 17.1 18.4 16.6 13.4 14.7 17.7 16.2 16.2 17.7 20.0 21.2 25.9 24.3 29.0 22.5 19.0 19.0 19.5 22.7 29.2 23.7 23.7 26.2 24.8 21.8 22.1 22.8

Hybrid funds 22.0% 23.8 28.5 27.1 18.7 15.6 15.9 11.1 10.7 16.7 15.1 13.8 13.7 15.9 19.0 21.0 16.4 19.4 16.2 15.5 14.7 15.7 18.6 23.9 19.9 18.8 22.2 20.4 20.1 19.9 20.9

Bond funds 15.5% 19.6 28.3 20.5 18.4 17.0 16.4 21.5 22.6 28.3 20.3 20.0 20.4 20.5 25.1 26.9 25.7 27.4 31.4 26.7 24.2 23.1 25.8 35.8 27.8 31.0 32.0 26.9 35.7 33.7 32.6

Total 29.8% 38.6 56.7 36.9 31.9 31.0 28.1 28.8 29.9 35.2 28.9 30.0 30.5 32.2 34.5 39.9 34.2 38.7 31.5 24.7 23.7 23.9 27.1 35.8 29.2 29.2 31.5 28.6 29.5 27.6 27.8

Equity funds 35.6% 50.9 73.0 45.9 38.0 37.7 33.1 26.7 28.7 31.6 29.4 30.7 31.9 34.0 34.9 41.5 35.4 41.2 29.5 23.1 23.2 23.7 27.0 34.6 28.0 27.3 30.0 28.7 24.9 24.7 25.3

Hybrid funds 26.3% 30.2 40.7 35.8 25.7 22.9 22.2 17.0 16.4 24.1 21.3 19.8 18.8 21.6 25.8 29.1 21.2 24.7 19.6 18.1 17.3 18.7 21.4 29.9 24.1 21.8 26.0 23.0 22.8 22.0 23.4

Bond funds 24.0% 30.7 47.5 30.4 27.7 26.2 24.1 32.7 33.8 43.1 30.4 32.0 30.9 30.6 36.8 36.7 34.7 35.9 40.6 32.1 28.4 27.1 30.4 41.8 33.6 35.7 36.3 30.2 41.3 36.6 35.6

DATA SECTION 3

Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1 The

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 The 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.

LONG-TERM MUTUAL FUNDS

197

TABLE 27

Portfolio Holdings of Long-Term Mutual Funds and Percentage of Total Net Assets Year-end

Year

Total net assets

Common and preferred Long-term U.S. stocks government bonds

Corporate bonds

Municipal bonds

Liquid assets

Other

$1,215,218 1,718,203 2,358,258 3,004,185 4,059,429 3,910,200 3,424,533 2,687,959 3,761,034 4,489,609 5,055,105 6,024,800 6,609,155 3,733,992 5,090,647 5,869,613 5,507,500 6,295,160 8,224,236 8,796,913 8,622,970

$259,107 264,972 282,272 286,592 293,565 309,752 379,740 481,467 504,549 537,297 612,797 644,738 749,428 705,030 849,809 1,084,865 1,186,130 1,379,948 1,209,184 1,213,026 1,251,553

$190,837 238,003 292,770 389,213 388,472 348,928 371,436 417,331 501,853 533,250 549,980 668,278 784,014 676,684 1,021,925 1,258,388 1,318,813 1,605,106 1,730,932 1,841,586 1,794,515

$245,331 245,183 266,324 292,395 267,426 269,334 289,651 320,477 331,981 318,354 330,945 359,163 369,055 336,878 451,151 479,666 506,841 592,863 512,657 568,188 582,835

$141,755 151,988 198,826 191,393 219,098 277,164 222,475 208,939 259,641 307,111 303,189 346,768 381,679 314,286 365,787 330,355 461,852 516,627 659,196 742,614 671,029

$6,026 5,645 10,866 9,753 5,204 4,008 1,768 1,910 3,038 8,480 12,536 15,956 21,077 21,532 17,411 6,963 -39,739 -26,196 -3,193 -11,700 -25,686

12.6% 10.1 8.3 6.9 5.6 6.1 8.1 11.7 9.4 8.7 8.9 8.0 8.4 12.2 10.9 12.0 13.3 13.3 9.8 9.2 9.7

9.3% 9.1 8.6 9.3 7.4 6.8 7.9 10.1 9.4 8.6 8.0 8.3 8.8 11.7 13.1 13.9 14.7 15.5 14.0 14.0 13.9

DATA SECTION 3

Millions of dollars

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$2,058,275 2,623,994 3,409,315 4,173,531 5,233,193 5,119,386 4,689,603 4,118,082 5,362,097 6,194,101 6,864,553 8,059,704 8,914,408 5,788,401 7,796,729 9,029,849 8,941,397 10,363,508 12,333,012 13,150,627 12,897,215

Percent

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

100.0% 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

59.0% 65.5 69.2 72.0 77.6 76.4 73.0 65.3 70.1 72.5 73.6 74.8 74.1 64.5 65.3 65.0 61.6 60.7 66.7 66.9 66.9

11.9% 9.3 7.8 7.0 5.1 5.3 6.2 7.8 6.2 5.1 4.8 4.5 4.1 5.8 5.8 5.3 5.7 5.7 4.2 4.3 4.5

6.9% 5.8 5.8 4.6 4.2 5.4 4.7 5.1 4.8 5.0 4.4 4.3 4.3 5.4 4.7 3.7 5.2 5.0 5.3 5.6 5.2

0.3% 0.2 0.3 0.2 0.1 0.1 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.4 0.2 0.1 -0.4 -0.3 0.0 -0.1 -0.2

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.

198

2016 INVESTMENT COMPANY FACT BOOK

TABLE 28

Portfolio Holdings of Long-Term Mutual Funds as a Percentage of Total Net Assets by Type of Fund Year-end

Year

Total net assets

Common and preferred Long-term U.S. Corporate stocks government bonds bonds

Total net assets

Municipal bonds

Liquid assets

Other

Millions of dollars

94.3% 94.2 95.0 95.2 95.5 95.6 95.2 93.5 95.8 95.7 95.6 95.6 95.6 95.7 96.1

0.1% 0.4 0.2 0.1 0.1 0.1 0.1 0.2 0.1 0.2 0.3 0.3 0.2 0.2 0.2

0.5% 0.8 0.5 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.5

0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

5.0% 4.6 4.2 4.2 3.9 3.8 4.2 5.6 3.5 3.4 3.5 3.4 3.5 3.5 3.2

0.0% 0.0 0.0 0.1 0.1 0.1 0.2 0.3 0.1 0.1 0.0 0.0 0.0 0.1 0.1

$3,392,399 2,642,420 3,653,370 4,342,577 4,885,444 5,832,582 6,413,222 3,655,162 4,872,541 5,596,629 5,212,989 5,938,747 7,762,721 8,314,321 8,148,257

Hybrid funds 2001 100.0% 2002 100.0 2003 100.0 2004 100.0 2005 100.0 2006 100.0 2007 100.0 2008 100.0 2009 100.0 2010 100.0 2011 100.0 2012 100.0 2013 100.0 2014 100.0 2015 100.0

59.9% 57.4 62.5 63.5 62.6 61.2 60.5 55.4 58.3 60.7 59.3 59.4 61.3 59.5 57.7

11.9% 12.4 10.6 11.0 10.5 10.0 10.3 9.8 9.8 8.9 9.4 8.9 7.8 8.2 8.8

20.4% 22.3 19.7 18.4 19.5 19.5 20.8 24.3 23.4 22.3 22.1 21.1 18.7 19.6 19.6

0.2% 0.2 0.3 0.4 0.4 0.3 0.3 0.4 0.4 0.5 0.5 0.5 0.4 0.5 0.6

7.5% 7.5 6.9 6.6 6.9 8.9 8.0 9.6 7.7 7.3 7.9 9.4 11.2 11.7 13.3

0.2% 0.1 0.0 0.1 0.0 0.1 0.1 0.4 0.5 0.4 0.8 0.8 0.6 0.4 0.0

$358,027 335,276 447,570 552,250 621,479 731,503 821,522 562,262 717,580 842,198 883,981 1,034,058 1,285,009 1,376,586 1,336,584

Bond funds 2001 100.0% 2002 100.0 2003 100.0 2004 100.0 2005 100.0 2006 100.0 2007 100.0 2008 100.0 2009 100.0 2010 100.0 2011 100.0 2012 100.0 2013 100.0 2014 100.0 2015 100.0

1.1% 0.6 0.8 0.8 0.8 0.8 1.0 0.6 0.8 0.9 0.8 0.9 1.1 1.1 0.9

35.5% 37.6 35.8 36.2 39.6 37.4 38.9 40.8 34.8 38.2 37.8 37.0 32.9 31.3 32.7

29.9% 28.1 31.3 31.7 30.0 33.5 35.0 33.2 37.4 40.0 38.2 39.5 43.7 43.9 43.7

30.8% 28.0 26.2 24.2 23.9 23.6 21.6 21.2 20.1 18.1 17.4 17.1 15.2 16.1 16.8

2.7% 5.5 5.8 6.6 5.1 4.3 3.0 3.6 6.5 3.0 7.4 6.5 7.4 8.4 6.9

0.0% 0.0 0.1 0.4 0.6 0.5 0.6 0.5 0.4 -0.1 -1.7 -1.0 -0.4 -0.7 -0.9

$939,177 1,140,387 1,261,157 1,299,274 1,357,630 1,495,619 1,679,664 1,570,978 2,206,609 2,591,022 2,844,428 3,390,704 3,285,282 3,459,721 3,412,371

DATA SECTION 3

Equity funds 2001 100.0% 2002 100.0 2003 100.0 2004 100.0 2005 100.0 2006 100.0 2007 100.0 2008 100.0 2009 100.0 2010 100.0 2011 100.0 2012 100.0 2013 100.0 2014 100.0 2015 100.0

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.

LONG-TERM MUTUAL FUNDS

199

TABLE 29

Paid and Reinvested Dividends of Long-Term Mutual Funds by Type of Fund

Millions of dollars, annual

DATA SECTION 3

Paid dividends Year 1984 e 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total $7,238 12,719 22,689 31,708 31,966 34,102 33,156 35,145 58,608 73,178 61,261 67,229 73,282 79,522 81,011 95,443 88,215 82,967 82,065 85,926 98,131 115,502 143,500 181,014 182,120 168,019 180,989 202,446 215,295 209,487 237,039 242,330

Equity funds $2,613 3,229 6,328 7,246 6,554 10,235 8,787 9,007 17,023 20,230 17,279 22,567 25,061 27,597 25,495 32,543 27,042 21,390 20,472 24,359 34,708 42,413 60,112 77,563 70,598 58,877 62,196 68,706 83,226 84,509 101,055 108,268

Hybrid funds $583 1,098 1,499 1,934 1,873 2,165 2,350 2,337 4,483 6,810 6,662 8,856 9,580 11,319 11,104 12,441 10,848 10,361 9,740 9,920 12,186 16,691 19,134 25,058 26,032 22,213 23,277 29,026 24,937 24,208 29,949 31,358

Reinvested dividends Bond funds $4,042 8,392 14,862 22,528 23,539 21,702 22,018 23,801 37,102 46,137 37,320 35,806 38,642 40,606 44,413 50,458 50,325 51,216 51,853 51,648 51,237 56,397 64,254 78,393 85,490 86,930 95,516 104,714 107,131 100,769 106,035 102,705

Total $4,655 7,731 13,991 18,976 17,494 20,584 21,124 24,300 30,393 38,116 39,136 46,635 53,213 58,423 60,041 69,973 66,277 62,306 62,413 66,870 78,253 94,024 119,074 151,777 153,100 140,359 152,331 172,526 186,528 183,897 211,694 218,402

Equity funds $1,881 2,321 3,706 4,841 4,476 7,119 6,721 7,255 8,845 12,174 12,971 18,286 21,345 23,100 22,377 27,332 23,786 19,251 18,560 22,127 31,427 38,435 54,210 69,596 63,634 53,098 56,385 62,436 76,125 77,978 93,774 100,850

Hybrid funds $432 768 1,087 1,476 1,217 1,383 1,717 1,898 2,923 4,239 4,907 6,792 8,031 9,413 9,328 10,544 9,537 9,270 8,778 8,840 10,668 14,579 16,989 22,092 23,045 19,388 20,671 25,630 22,678 22,146 27,698 29,139

Bond funds $2,342 4,642 9,197 12,659 11,801 12,082 12,686 15,147 18,625 21,703 21,258 21,558 23,837 25,910 28,336 32,096 32,954 33,786 35,076 35,903 36,158 41,011 47,875 60,090 66,421 67,873 75,275 84,461 87,725 83,773 90,222 88,413

e Portions of the paid dividend totals for equity, hybrid, and bond funds are estimated; the total is not estimated. 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.

200

2016 INVESTMENT COMPANY FACT BOOK

TABLE 30

Paid and Reinvested Capital Gains of Long-Term Mutual Funds by Type of Fund Millions of dollars, annual Paid capital gains Total $6,019 4,895 17,661 22,926 6,354 14,766 8,017 13,917 22,089 35,905 29,744 54,271 100,489 182,764 164,989 237,624 325,841 68,626 16,097 14,397 54,741 129,058 256,915 413,641 132,404 15,300 42,950 73,284 100,185 239,183 399,582 379,426

Hybrid funds $553 739 1,240 1,605 620 540 443 861 1,488 3,496 2,399 3,322 10,826 19,080 21,572 16,841 18,645 6,105 907 758 6,600 11,895 18,720 32,163 9,786 771 1,290 5,503 5,563 22,834 40,526 35,248

Reinvested capital gains Bond funds $219 457 2,478 2,718 948 1,562 742 1,095 3,306 4,704 993 745 1,451 2,941 4,737 1,299 1,202 2,433 4,651 5,857 6,560 3,995 2,342 3,795 11,735 8,789 25,921 16,326 27,851 14,544 13,312 12,938

Total $5,122 3,751 14,275 17,816 4,769 9,710 5,515 9,303 14,906 25,514 24,864 46,866 87,416 164,916 151,105 206,508 298,429 64,820 14,749 12,956 49,896 117,566 236,465 380,921 123,272 13,994 38,961 67,437 93,350 227,570 382,164 363,847

Equity funds $4,655 3,091 11,851 15,449 3,883 8,744 4,975 8,242 12,233 19,954 22,038 43,550 76,638 145,358 127,473 190,300 279,891 56,965 9,838 7,188 38,074 103,208 217,010 347,633 103,801 5,418 14,785 48,120 62,866 191,961 330,047 316,962

Hybrid funds $338 398 778 1,056 364 348 255 484 1,130 2,687 2,086 2,832 9,769 17,360 19,698 15,229 17,506 5,790 887 703 6,167 10,955 17,509 30,011 9,064 702 1,199 5,275 5,328 22,138 39,564 34,580

Bond funds $129 261 1,646 1,312 522 617 285 577 1,542 2,872 740 484 1,009 2,198 3,935 979 1,032 2,065 4,024 5,065 5,655 3,403 1,946 3,277 10,407 7,874 22,977 14,042 25,157 13,471 12,554 12,305

DATA SECTION 3

Year 1984 e 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Equity funds $5,247 3,699 13,942 18,603 4,785 12,665 6,833 11,961 17,294 27,705 26,351 50,204 88,212 160,744 138,681 219,484 305,994 60,088 10,538 7,782 41,581 113,167 235,853 377,682 110,883 5,740 15,739 51,455 66,771 201,806 345,744 331,241

e Portions of the paid capital gains totals for equity, hybrid, and bond funds are estimated; the total is not estimated. 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.

LONG-TERM MUTUAL FUNDS

201

202

2016 INVESTMENT COMPANY FACT BOOK

Purchases $119,273 259,496 500,597 530,601 410,509 471,744 554,720 735,698 949,404 1,335,514 1,433,739 1,550,510 2,018,253 2,384,639 2,861,562 3,437,180 4,922,927 4,688,530 4,018,969 4,281,605 4,310,180 4,834,374 5,737,363 7,098,611 7,353,050 6,933,548 7,336,284 8,533,641 8,196,082 9,255,798 8,526,007 8,880,055

Sales $98,934 186,985 365,087 485,271 421,223 445,453 505,780 608,129 758,476 1,060,359 1,329,329 1,400,702 1,736,884 2,108,981 2,560,074 3,224,301 4,698,192 4,393,114 3,807,392 3,998,766 4,019,273 4,532,166 5,398,108 6,721,251 7,294,533 6,453,779 6,866,563 8,127,548 7,608,901 8,735,929 7,967,642 8,425,786

Total portfolio Net purchases $20,338 72,511 135,509 45,330 -10,713 26,291 48,940 127,569 190,928 275,155 104,409 149,809 281,370 275,659 301,487 212,878 224,734 295,416 211,578 282,840 290,907 302,208 339,255 377,360 58,518 479,769 469,721 406,093 587,181 519,869 558,365 454,269

Purchases $56,588 80,719 134,446 198,859 112,742 142,771 166,398 250,289 327,518 506,713 628,668 790,017 1,151,262 1,457,384 1,762,565 2,262,505 3,560,671 2,736,933 2,176,363 2,054,379 2,390,924 2,765,100 3,330,057 3,835,574 3,655,854 2,644,973 2,811,558 3,033,610 2,773,356 3,409,812 3,521,681 3,595,161

Sales $50,900 72,577 118,026 176,004 128,815 141,694 146,580 209,276 261,857 380,855 512,346 686,756 927,266 1,268,983 1,597,311 2,088,544 3,330,417 2,609,657 2,141,754 1,884,711 2,198,578 2,610,805 3,172,222 3,733,130 3,715,557 2,543,511 2,752,269 3,034,111 2,828,018 3,226,356 3,446,149 3,558,715

Common stock Net purchases $5,688 8,142 16,421 22,855 -16,073 1,077 19,817 41,013 65,661 125,858 116,321 103,260 223,996 188,401 165,255 173,962 230,254 127,275 34,609 169,667 192,346 154,296 157,835 102,444 -59,703 101,462 59,289 -501 -54,661 183,456 75,532 36,446

Purchases $62,685 178,777 366,150 331,741 297,767 328,973 388,322 485,409 621,886 828,801 805,071 760,494 866,991 927,255 1,098,997 1,174,674 1,362,255 1,951,597 1,842,606 2,227,227 1,919,256 2,069,274 2,407,306 3,263,037 3,697,197 4,288,575 4,524,726 5,500,031 5,422,726 5,845,986 5,004,326 5,284,894

Sales $48,035 114,408 247,062 309,267 292,407 303,759 359,199 398,853 496,619 679,504 816,983 713,946 809,618 839,997 962,764 1,135,757 1,367,775 1,783,456 1,665,638 2,114,054 1,820,695 1,921,362 2,225,886 2,988,121 3,578,976 3,910,268 4,114,294 5,093,437 4,780,883 5,509,573 4,521,493 4,867,071

Other securities Net purchases $14,650 64,369 119,089 22,474 5,359 25,214 29,123 86,556 125,268 149,298 -11,912 46,548 57,373 87,258 136,233 38,917 -5,519 168,141 176,968 113,173 98,561 147,912 181,420 274,916 118,221 378,306 410,432 406,593 641,842 336,414 482,833 417,823

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.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Long-Term Mutual Funds

TABLE 31

DATA SECTION 3

203

Purchases $54,933 77,327 129,723 196,902 119,861 148,346 187,592 251,773 339,003 500,206 618,004 785,867 1,116,906 1,421,211 1,723,752 2,232,828 3,515,572 2,707,359 2,140,797 1,965,419 2,278,755 2,671,170 3,231,135 3,760,234 3,628,276 2,749,913 2,828,781 2,914,958 2,639,806 3,178,944 3,301,070 3,385,138

Sales $49,853 70,685 111,233 175,292 130,821 144,753 169,373 207,947 268,868 382,433 508,394 678,060 896,644 1,223,463 1,557,212 2,049,540 3,258,635 2,593,454 2,112,759 1,822,753 2,110,605 2,524,339 3,063,822 3,658,395 3,698,255 2,676,641 2,828,824 2,943,155 2,696,126 2,993,417 3,191,111 3,309,322

Total portfolio Net purchases $5,080 6,642 18,491 21,611 -10,959 3,593 18,219 43,827 70,135 117,773 109,610 107,807 220,262 197,748 166,540 183,288 256,937 113,905 28,039 142,666 168,150 146,831 167,313 101,838 -69,979 73,273 -44 -28,196 -56,321 185,527 109,959 75,817

Purchases $49,098 66,762 110,016 170,715 100,888 128,998 151,907 224,117 300,712 451,485 564,380 718,298 1,050,884 1,352,085 1,635,842 2,126,860 3,393,017 2,571,182 2,017,847 1,902,718 2,216,948 2,592,059 3,129,822 3,582,758 3,361,901 2,433,267 2,568,443 2,756,087 2,499,401 3,043,744 3,120,637 3,187,955

Sales $44,213 61,599 96,512 150,705 113,635 127,026 133,630 186,785 242,319 345,357 456,708 621,699 832,486 1,166,649 1,475,384 1,941,505 3,144,116 2,464,587 1,999,827 1,758,142 2,053,652 2,452,257 2,966,143 3,490,174 3,426,442 2,339,181 2,532,634 2,785,493 2,571,677 2,877,082 3,033,171 3,122,235

Common stock Net purchases $4,885 5,163 13,504 20,009 -12,747 1,973 18,277 37,333 58,393 106,128 107,672 96,599 218,397 185,436 160,458 185,355 248,902 106,595 18,020 144,576 163,296 139,803 163,679 92,584 -64,540 94,086 35,809 -29,406 -72,276 166,662 87,466 65,720

Purchases $5,835 10,565 19,708 26,188 18,973 19,348 35,685 27,656 38,291 48,720 53,623 67,569 66,022 69,126 87,909 105,968 122,554 136,177 122,950 62,701 61,807 79,110 101,313 177,476 266,375 316,646 260,338 158,871 140,405 135,200 180,433 197,184

Sales $5,640 9,086 14,721 24,586 17,186 17,728 35,743 21,162 26,549 37,076 51,686 56,361 64,157 56,814 81,827 108,035 114,519 128,867 112,931 64,611 56,953 72,083 97,679 168,221 271,813 337,459 296,191 157,662 124,449 116,335 157,939 187,087

Other securities Net purchases $195 1,479 4,987 1,601 1,788 1,621 -59 6,494 11,742 11,644 1,937 11,208 1,865 12,312 6,082 -2,067 8,035 7,310 10,019 -1,910 4,854 7,028 3,634 9,255 -5,439 -20,813 -35,853 1,209 15,955 18,864 22,493 10,097

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.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Equity Mutual Funds

TABLE 32

DATA SECTION 3

LONG-TERM MUTUAL FUNDS

204

2016 INVESTMENT COMPANY FACT BOOK

Purchases $11,589 19,647 34,746 48,335 28,070 26,747 30,606 41,999 63,564 113,314 134,972 180,638 223,905 255,207 282,651 296,235 308,821 357,557 340,650 360,653 404,955 397,695 408,861 529,061 594,156 477,006 512,564 660,464 723,933 912,709 931,786 943,656

Sales $9,258 14,915 28,007 44,168 31,455 24,864 26,671 33,747 43,131 72,150 110,305 170,864 201,872 234,820 257,096 296,850 335,531 334,161 320,591 312,111 337,219 346,260 381,376 465,049 577,635 443,131 463,315 596,747 662,086 832,006 864,486 910,815

Total portfolio Net purchases $2,331 4,732 6,739 4,168 -3,384 1,883 3,935 8,252 20,433 41,164 24,667 9,774 22,033 20,387 25,555 -615 -26,711 23,396 20,059 48,542 67,736 51,435 27,485 64,011 16,521 33,876 49,250 63,716 61,847 80,704 67,300 32,841

Purchases $7,129 13,378 21,894 26,282 10,628 12,459 13,327 18,657 23,965 49,686 54,808 67,616 92,485 98,109 115,703 128,303 158,039 155,235 145,370 137,490 163,795 165,487 191,740 241,633 281,814 200,907 225,191 254,665 253,601 345,127 370,570 377,910

Sales $5,822 10,513 19,451 23,989 13,833 13,598 11,832 15,435 17,200 30,485 46,429 60,602 88,464 94,976 111,401 138,923 174,998 134,368 129,204 113,785 132,966 150,166 197,120 230,855 273,655 194,826 204,365 229,513 237,412 327,859 385,211 403,229

Common stock Net purchases $1,308 2,865 2,443 2,293 -3,205 -1,139 1,494 3,222 6,765 19,201 8,380 7,015 4,021 3,132 4,301 -10,620 -16,960 20,868 16,166 23,706 30,829 15,321 -5,380 10,778 8,159 6,081 20,826 25,152 16,189 17,268 -14,641 -25,319

Purchases $4,459 6,269 12,853 22,053 17,442 14,288 17,279 23,342 39,599 63,628 80,163 113,021 131,420 157,099 166,948 167,932 150,782 202,322 195,280 223,163 241,160 232,208 217,122 287,428 312,342 276,099 287,374 405,799 470,332 567,582 561,216 565,747

Sales $3,436 4,402 8,556 20,179 17,622 11,266 14,839 18,313 25,931 41,665 63,876 110,262 113,408 139,844 145,694 157,927 160,533 199,794 191,387 198,326 204,253 196,094 184,256 234,194 303,980 248,305 258,950 367,235 424,674 504,146 479,275 507,587

Other securities Net purchases $1,023 1,867 4,297 1,874 -179 3,022 2,440 5,029 13,667 21,963 16,287 2,759 18,011 17,255 21,254 10,005 -9,751 2,528 3,893 24,837 36,907 36,114 32,865 53,233 8,363 27,794 28,424 38,564 45,658 63,435 81,941 58,160

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.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Hybrid Mutual Funds

TABLE 33

DATA SECTION 3

205

Purchases $52,751 162,522 336,127 285,363 262,577 296,651 336,522 441,926 546,837 721,995 680,764 584,006 677,442 708,221 855,159 908,117 1,098,534 1,623,614 1,537,522 1,955,533 1,626,470 1,765,509 2,097,367 2,809,317 3,130,618 3,706,628 3,994,939 4,958,219 4,832,343 5,164,145 4,293,151 4,551,261

Sales $39,823 101,385 225,848 265,812 258,947 275,836 309,735 366,435 446,476 605,777 710,631 551,779 638,368 650,698 745,767 877,911 1,104,026 1,465,499 1,374,042 1,863,902 1,571,448 1,661,567 1,952,910 2,597,806 3,018,643 3,334,008 3,574,424 4,587,646 4,250,688 4,910,506 3,912,045 4,205,649

Total portfolio Net purchases $12,928 61,137 110,279 19,551 3,630 20,815 26,787 75,490 100,360 116,218 -29,867 32,227 39,075 57,523 109,392 30,205 -5,491 158,115 163,480 91,632 55,022 103,942 144,456 211,511 111,975 372,621 420,515 370,573 581,654 253,639 381,106 345,611

Purchases $361 579 2,537 1,862 1,226 1,314 1,164 7,514 2,840 5,542 9,479 4,103 7,893 7,190 11,020 7,342 9,615 10,515 13,146 14,171 10,181 7,554 8,496 11,183 12,138 10,798 17,925 22,858 20,354 20,940 30,474 29,297

Sales $865 465 2,062 1,310 1,347 1,071 1,118 7,056 2,338 5,013 9,210 4,456 6,316 7,358 10,525 8,115 11,303 10,703 12,723 12,785 11,959 8,382 8,960 12,100 15,460 9,503 15,271 19,105 18,929 21,415 27,766 33,251

Common stock Net purchases -$504 114 475 553 -121 243 46 458 502 528 269 -353 1,578 -167 496 -773 -1,688 -188 423 1,386 -1,779 -828 -464 -917 -3,321 1,295 2,654 3,752 1,425 -475 2,707 -3,955

Purchases $52,390 161,943 333,590 283,501 261,351 295,337 335,358 434,411 543,997 716,453 671,285 579,903 669,549 701,031 844,139 900,774 1,088,919 1,613,099 1,524,376 1,941,363 1,616,290 1,757,955 2,088,871 2,798,134 3,118,480 3,695,830 3,977,014 4,935,361 4,811,989 5,143,205 4,262,677 4,521,964

Sales $38,958 100,919 223,785 264,502 257,600 274,765 308,617 359,379 444,138 600,763 701,421 547,323 632,052 643,340 735,242 869,796 1,092,722 1,454,796 1,361,320 1,851,117 1,559,489 1,653,185 1,943,950 2,585,706 3,003,183 3,324,504 3,559,153 4,568,541 4,231,760 4,889,091 3,884,279 4,172,398

Other securities Net purchases $13,432 61,024 109,805 18,999 3,751 20,572 26,741 75,033 99,858 115,690 -30,136 32,580 37,497 57,691 108,897 30,978 -3,803 158,303 163,057 90,246 56,801 104,770 144,921 212,428 115,297 371,326 417,861 366,820 580,229 254,114 378,398 349,566

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.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Total Portfolio, Common Stock, and Other Securities: Purchases, Sales, and Net Purchases by Bond Mutual Funds

TABLE 34

DATA SECTION 3

LONG-TERM MUTUAL FUNDS

206

2016 INVESTMENT COMPANY FACT BOOK

Total $233,554 243,802 292,152 316,096 337,954 428,093 498,341 542,442 546,194 565,319 611,005 753,018 901,807 1,058,886 1,351,678 1,613,146 1,845,248 2,285,310 2,265,075 2,040,022 1,901,700 2,026,822 2,338,451 3,085,760 3,832,236 3,315,893 2,803,514 2,690,950 2,693,169 2,717,808 2,724,641 2,754,743

Prime $157,951 151,849 164,610 187,087 210,897 283,939 305,189 314,346 300,310 312,701 352,972 449,829 540,146 647,005 854,061 1,079,523 1,243,598 1,564,598 1,535,621 1,339,689 1,209,995 1,291,119 1,542,584 1,857,280 1,848,349 1,809,923 1,618,488 1,429,178 1,476,993 1,485,187 1,453,071 1,273,390

Taxexempt $23,802 36,249 63,806 61,420 65,758 69,470 83,777 89,984 94,841 103,439 109,894 121,695 137,871 157,658 184,711 199,897 233,869 259,081 276,297 290,291 311,999 336,373 369,029 468,092 493,680 398,935 330,006 291,697 287,426 270,612 260,787 254,931 Total 425 460 487 543 610 673 741 820 864 920 963 997 988 1,013 1,026 1,045 1,039 1,015 988 973 944 870 847 805 783 704 652 632 580 555 527 481

Government 158 151 147 154 159 160 176 211 235 265 276 284 277 279 277 281 275 269 259 251 240 221 215 203 200 180 165 166 158 152 148 145

Prime 173 199 213 235 274 310 329 341 350 362 373 392 392 406 410 423 429 421 418 409 399 372 358 342 334 296 277 265 242 230 216 191

Taxexempt 94 110 127 154 177 203 236 268 279 293 314 321 319 328 339 341 335 325 311 313 305 277 274 260 249 228 210 201 180 173 163 145 Total 425 460 487 543 610 673 762 871 914 1,009 1,261 1,380 1,453 1,549 1,627 1,730 1,855 1,948 2,006 2,031 2,053 2,031 2,013 2,015 1,990 1,846 1,781 1,730 1,623 1,571 1,506 1,427

Government 158 151 147 154 159 160 183 228 248 286 368 404 413 442 462 488 534 573 581 572 577 570 579 574 584 561 544 544 519 508 512 522

Prime 173 199 213 235 274 310 339 363 368 386 490 549 592 633 675 742 797 832 882 890 900 894 875 873 859 769 737 711 655 633 588 534

Taxable

Government $51,800 55,705 63,736 67,589 61,298 74,685 109,376 138,111 151,043 149,180 148,139 181,494 223,790 254,223 312,907 333,726 367,780 461,631 453,157 410,041 379,706 399,330 426,838 760,389 1,490,208 1,107,035 855,021 970,075 928,749 962,009 1,010,783 1,226,422

Taxable

Taxable

Taxexempt 94 110 127 154 177 203 240 280 298 337 403 427 448 474 490 500 524 543 543 569 576 567 559 568 547 516 500 475 449 430 406 371

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.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Number of share classes

Number of funds

Millions of dollars

Total net assets

Year-end

Money Market Funds: Total Net Assets, Number of Funds, and Number of Share Classes by Type of Fund

TABLE 35

DATA SECTION 4

Total $901,807 1,058,886 1,351,678 1,613,146 1,845,248 2,285,310 2,265,075 2,040,022 1,901,700 2,026,822 2,338,451 3,085,760 3,832,236 3,315,893 2,803,514 2,690,950 2,693,169 2,717,808 2,724,641 2,754,743

Taxexempt $137,871 157,658 184,711 199,897 233,869 259,081 276,297 290,291 311,999 336,373 369,029 468,092 493,680 398,935 330,006 291,697 287,426 270,612 260,787 254,931 Total $592,743 663,683 835,624 965,289 1,062,252 1,135,500 1,065,333 939,224 853,187 876,493 1,008,656 1,226,440 1,370,803 1,080,913 958,744 950,737 949,381 936,920 907,028 941,244

Government $94,786 100,991 121,664 132,915 151,837 169,883 157,011 141,248 126,473 126,244 140,483 185,526 289,731 214,478 189,694 203,677 205,513 205,056 199,533 346,452

Prime $387,844 439,946 571,834 676,590 731,699 776,132 716,297 607,364 534,920 546,843 644,129 755,324 777,860 631,052 563,075 550,610 540,892 535,602 517,492 410,049

Taxable

Prime $540,146 647,005 854,061 1,079,523 1,243,598 1,564,598 1,535,621 1,339,689 1,209,995 1,291,119 1,542,584 1,857,280 1,848,349 1,809,923 1,618,488 1,429,178 1,476,993 1,485,187 1,453,071 1,273,390

Taxable

Government $223,790 254,223 312,907 333,726 367,780 461,631 453,157 410,041 379,706 399,330 426,838 760,389 1,490,208 1,107,035 855,021 970,075 928,749 962,009 1,010,783 1,226,422

Taxexempt $110,113 122,747 142,126 155,785 178,716 189,484 192,025 190,612 191,794 203,406 224,043 285,590 303,212 235,383 205,975 196,451 202,975 196,262 190,003 184,743 Total $309,064 395,202 516,054 647,856 782,996 1,149,810 1,199,743 1,100,798 1,048,514 1,150,328 1,329,796 1,859,321 2,461,433 2,234,981 1,844,770 1,740,213 1,743,788 1,780,889 1,817,613 1,813,500

Government $129,003 153,232 191,243 200,812 215,943 291,748 296,146 268,793 253,233 273,085 286,354 574,863 1,200,476 892,556 665,327 766,398 723,236 756,954 811,250 879,970

Prime $152,302 207,059 282,227 402,933 511,900 788,466 819,324 732,326 675,076 744,276 898,455 1,101,955 1,070,489 1,178,872 1,055,412 878,568 936,101 949,585 935,579 863,341

Taxable

Institutional money market funds Taxexempt $27,758 34,911 42,585 44,111 55,154 69,597 84,272 99,679 120,205 132,968 144,986 182,503 190,467 163,553 124,031 95,247 84,451 74,350 70,784 70,188

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.

Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Retail money market funds

All money market funds

Millions of dollars, year-end

Total Net Assets of Money Market Funds by Type of Fund

TABLE 36

DATA SECTION 4

MONEY MARKET FUNDS

207

208

2016 INVESTMENT COMPANY FACT BOOK

Total $89,422 103,466 235,457 193,681 159,365 375,291 -45,937 -263,403 -156,744 62,085 245,162 654,412 637,155 -539,150 -525,064 -124,073 -178 15,037 6,235 21,462

Government $20,572 20,129 45,178 8,486 14,412 86,621 -11,131 -50,998 -36,125 13,182 19,615 319,240 697,443 -414,948 -253,927 107,294 -43,343 29,348 48,232 40,831

Prime $58,935 69,107 167,909 174,957 118,354 267,329 -51,060 -222,179 -139,213 28,009 200,115 251,219 -73,523 -28,571 -201,765 -192,713 47,096 2,473 -31,890 -13,868

Total $52,940 46,745 131,072 82,215 43,576 36,449 -80,065 -151,260 -88,769 2,358 96,543 172,657 114,128 -308,406 -124,196 -1,331 -1,185 -12,214 -30,631 5,301

Government $6,181 4,781 15,835 -757 504 13,579 -10,174 -20,609 -15,871 -3,652 9,317 38,769 98,267 -104,057 -25,964 20,461 -781 -1,143 -5,843 20,728

Prime $39,559 32,206 100,508 73,145 24,417 12,827 -71,219 -125,743 -75,331 -4,781 71,069 83,264 2,099 -136,444 -69,827 -12,527 -7,592 -4,279 -18,302 -11,271

Taxexempt $7,200 9,758 14,728 9,827 18,655 10,043 1,328 -4,908 2,433 10,791 16,157 50,624 13,763 -67,906 -28,404 -9,265 7,187 -6,792 -6,486 -4,156 Total $36,481 56,721 104,386 111,466 115,789 338,842 34,128 -112,143 -67,975 59,728 148,619 481,755 523,027 -230,744 -400,869 -122,742 1,007 27,251 36,865 16,160

Government $14,391 15,347 29,343 9,243 13,908 73,043 -957 -30,389 -20,254 16,834 10,297 280,471 599,176 -310,891 -227,962 86,833 -42,563 30,491 54,075 20,103

Prime $19,376 36,901 67,401 101,812 93,937 254,502 20,159 -96,436 -63,882 32,790 129,046 167,955 -75,621 107,873 -131,938 -180,186 54,687 6,752 -13,588 -2,598

Taxable

Institutional money market funds Taxexempt $2,715 4,473 7,642 411 7,944 11,297 14,925 14,682 16,160 10,103 9,276 33,329 -528 -27,725 -40,968 -29,389 -11,117 -9,993 -3,621 -1,345

Note: Net new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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.

Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Taxable

Taxable Taxexempt $9,915 14,231 22,370 10,238 26,599 21,340 16,254 9,774 18,593 20,895 25,432 83,953 13,235 -95,631 -69,372 -38,654 -3,930 -16,784 -10,107 -5,501

Retail money market funds

All money market funds

Millions of dollars, annual

Net New Cash Flow* of Money Market Funds by Type of Fund

TABLE 37

DATA SECTION 4

TABLE 38

Net New Cash Flow and Components of Net New Cash Flow of Money Market Funds Millions of dollars, annual

Sales New + exchange $640,021 848,451 1,026,745 1,147,877 1,130,639 1,359,616 1,461,537 1,841,131 2,449,766 2,756,282 2,725,201 3,234,216 4,156,985 5,127,328 6,407,574 8,080,959 9,826,677 11,737,291 12,008,801 11,177,118 10,874,608 12,493,636 15,706,879 21,314,339 24,452,430 18,683,752 15,771,387 15,248,902 14,291,619 14,976,597 15,316,582 17,658,517

New2 $620,536 826,858 978,041 1,049,034 1,066,003 1,296,458 1,389,439 1,778,491 2,371,925 2,665,987 2,586,478 3,097,225 3,959,014 4,894,226 6,129,140 7,719,310 9,406,287 11,426,804 11,712,587 10,952,544 10,708,117 12,317,491 15,495,624 21,039,253 24,067,371 18,489,354 15,670,167 15,128,158 14,211,202 14,867,969 15,237,910 17,560,966

Redemptions Exchange 3 $19,485 21,592 48,704 98,843 64,636 63,158 72,098 62,640 77,841 90,295 138,722 136,990 197,971 233,102 278,434 361,649 420,391 310,487 296,215 224,574 166,492 176,145 211,255 275,086 385,059 194,399 101,220 120,744 80,417 108,629 78,672 97,551

Regular + exchange $604,944 853,743 993,193 1,137,805 1,130,534 1,295,484 1,438,358 1,835,063 2,465,772 2,770,172 2,716,675 3,144,834 4,067,563 5,023,863 6,172,116 7,887,278 9,667,312 11,362,000 12,054,738 11,440,521 11,031,353 12,431,551 15,461,717 20,659,927 23,815,275 19,222,902 16,296,451 15,372,976 14,291,797 14,961,561 15,310,347 17,637,056

Regular4 $586,990 831,067 948,656 1,062,671 1,074,346 1,235,527 1,372,764 1,763,106 2,382,976 2,673,464 2,599,400 3,001,968 3,868,772 4,783,096 5,901,590 7,540,912 9,256,350 11,065,468 11,783,209 11,213,929 10,861,076 12,260,771 15,269,074 20,408,620 23,498,612 19,012,386 16,191,894 15,259,873 14,204,776 14,857,792 15,211,292 17,531,891

Exchange5 $17,953 22,676 44,537 75,133 56,188 59,957 65,594 71,957 82,796 96,707 117,275 142,866 198,791 240,767 270,526 346,367 410,962 296,533 271,530 226,592 170,277 170,779 192,643 251,307 316,663 210,516 104,558 113,102 87,021 103,769 99,055 105,164

DATA SECTION 4

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net new cash flow1 $35,077 -5,293 33,552 10,072 106 64,132 23,179 6,068 -16,006 -13,890 8,525 89,381 89,422 103,466 235,457 193,681 159,365 375,291 -45,937 -263,403 -156,744 62,085 245,162 654,412 637,155 -539,150 -525,064 -124,073 -178 15,037 6,235 21,462

1 Net

new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 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. 2 New

MONEY MARKET FUNDS

209

TABLE 39

Paid and Reinvested Dividends of Money Market Funds by Type of Fund Millions of dollars, annual

DATA SECTION 4

Paid dividends

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total $16,435 15,708 14,832 15,654 21,618 28,619 30,258 28,604 20,280 18,991 23,737 37,038 42,555 48,843 57,375 69,004 98,219 79,307 32,251 17,041 18,390 50,186 96,423 127,907 93,857 18,619 7,161 5,237 6,618 8,020 7,565 7,907

Taxable money market funds $15,435 14,108 12,432 12,833 17,976 24,683 26,448 25,121 17,197 15,690 20,504 32,855 38,446 44,185 52,164 63,229 90,158 73,361 29,397 15,124 15,899 43,547 85,018 113,177 82,727 16,590 6,708 4,888 6,345 7,794 7,323 7,703

Reinvested dividends Tax-exempt money market funds $1,000 1,600 2,400 2,821 3,642 3,936 3,810 3,483 3,083 3,302 3,233 4,183 4,108 4,658 5,211 5,775 8,061 5,946 2,854 1,917 2,491 6,638 11,405 14,730 11,130 2,030 453 349 273 226 242 204

Total $13,730 12,758 11,514 11,946 15,692 23,050 26,282 22,809 14,596 11,615 16,739 27,985 31,516 37,979 43,443 50,648 72,771 56,367 22,033 11,314 11,889 32,803 61,488 82,457 61,134 11,035 4,447 3,261 4,212 5,206 5,000 5,328

Taxable money market funds $13,061 11,760 9,981 10,136 13,355 20,294 23,226 19,998 12,567 10,007 14,626 24,873 28,448 34,425 39,580 46,602 66,890 51,949 19,940 9,916 10,080 27,951 53,268 71,938 53,455 9,999 4,196 3,074 4,068 5,089 4,876 5,223

Tax-exempt money market funds $669 998 1,533 1,810 2,337 2,756 3,056 2,811 2,029 1,607 2,113 3,111 3,068 3,554 3,863 4,046 5,881 4,418 2,093 1,398 1,809 4,852 8,220 10,519 7,680 1,037 252 187 144 117 124 105

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.

210

2016 INVESTMENT COMPANY FACT BOOK

211

U.S. Treasury bills 21.0% 23.9 22.8 4.6 5.0 5.0 11.1 21.5 26.0 30.3 24.4 19.8 17.7 15.2 14.3 17.1 14.2 19.2 20.5 20.0 21.4 15.8 14.9 16.3 30.5 25.6 22.9 23.2 25.6 27.1 21.2 17.2

Other Treasury securities 7.5% 4.9 7.9 11.2 9.7 6.9 12.2 16.5 16.5 14.1 12.6 13.9 18.5 17.6 17.7 13.0 10.1 9.2 6.4 7.2 4.9 4.4 4.1 5.1 6.2 6.0 8.5 13.2 12.6 14.3 13.5 17.2

U.S. government agency issues 20.4% 15.9 14.4 22.0 20.5 20.6 20.6 20.3 21.6 20.7 26.3 28.5 25.4 25.1 30.4 37.1 32.0 34.5 33.2 33.8 34.5 28.1 21.5 24.1 36.2 35.4 33.3 28.9 26.7 29.4 31.3 32.8 Repurchase agreements 33.9% 38.2 39.1 44.9 58.4 62.7 45.7 40.9 34.7 32.8 34.0 34.1 35.2 37.8 33.4 28.2 37.9 31.7 35.5 36.3 35.9 50.0 58.6 53.7 26.8 30.6 33.0 31.6 33.0 27.9 34.7 32.2

Certificates of deposit 4.3% 2.9 4.1 4.8 1.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.3 0.1 0.0 0.2 0.1 0.3 0.2 0.0 0.1 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0

Eurodollar CDs 4.3% 6.3 4.9 7.4 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Commercial paper 7.3% 6.2 4.3 4.0 3.2 3.0 0.3 0.4 0.5 0.3 0.4 0.5 0.7 1.2 1.7 1.4 1.6 0.5 0.5 0.9 0.9 0.2 0.5 0.2 0.1 1.0 0.9 1.0 0.7 0.3 0.5 0.0

Bank notes1 – – – – – – – – – – 0.0% 0.0 0.0 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.2 0.1 0.1 0.0 0.0 0.0 0.0 Corporate notes 2 – – – – – – – – – – – – – – 0.2% 1.1 1.2 1.5 1.7 1.8 0.8 0.8 0.1 0.0 0.2 0.3 0.4 0.4 0.1 0.1 0.1 0.1

Other assets 3 1.3% 1.6 2.5 1.1 2.0 1.5 9.9 0.3 0.6 1.8 2.2 3.1 2.4 2.9 2.0 1.9 2.9 3.3 2.1 -0.3 1.2 0.5 0.3 0.2 -0.1 0.7 0.9 1.5 1.4 0.8 -1.2 0.4

2 Prior to 1998,

bank notes are included in other assets. 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.

$51,800 55,705 63,736 67,589 61,298 74,685 109,376 138,111 151,043 149,180 148,139 181,494 223,790 254,223 312,907 333,726 367,780 461,631 453,157 410,041 379,706 399,330 426,838 760,389 1,490,208 1,107,035 855,021 970,075 928,749 962,009 1,010,783 1,226,422

Millions of dollars

Total net assets

1 Prior to 1994,

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

Asset Composition of Taxable Government Money Market Funds as a Percentage of Total Net Assets

TABLE 40

DATA SECTION 4

MONEY MARKET FUNDS

46 44 51 35 28 31 46 58 55 61 37 48 49 50 52 48 45 55 52 52 36 27 32 31 48 47 47 45 46 48 44 40

Days

Average maturity

212

2016 INVESTMENT COMPANY FACT BOOK

U.S. Treasury bills 5.9% 4.6 3.6 1.0 1.0 1.3 4.4 5.7 2.7 2.6 2.4 1.4 0.5 0.4 0.4 0.3 0.3 0.4 1.3 1.4 0.3 0.6 0.1 0.8 1.9 2.3 2.7 3.1 3.4 2.2 2.1 1.9

Other Treasury securities 0.8% 1.0 1.6 0.9 0.2 0.8 2.2 2.9 2.5 2.4 1.3 0.9 1.6 0.5 0.8 0.3 0.1 0.3 0.3 0.3 0.1 0.1 0.2 0.2 0.5 1.3 1.9 3.8 4.2 4.3 2.6 2.8

U.S. government agency issues 4.1% 6.1 3.6 6.5 2.8 2.0 4.7 4.2 7.5 11.9 11.4 9.2 9.0 5.4 9.6 6.8 5.9 12.3 11.8 14.9 12.0 4.1 2.9 3.1 12.7 8.9 7.8 9.2 6.9 5.7 5.1 5.1 Repurchase agreements 3.3% 3.1 4.4 4.8 2.8 2.8 2.9 3.7 4.9 5.9 5.6 6.2 5.1 5.3 4.6 4.8 3.9 6.0 8.1 8.1 8.5 11.8 9.9 11.3 8.4 8.3 12.8 13.5 16.8 15.7 20.9 23.9

Certificates of deposit 13.6% 10.0 10.0 16.2 15.2 14.4 6.9 10.6 10.4 8.0 6.4 8.9 12.8 14.7 13.0 12.8 11.7 14.9 13.8 11.6 14.1 14.5 13.9 15.2 21.5 31.6 28.6 28.4 29.5 33.3 35.7 34.7

Eurodollar CDs 12.0% 10.2 11.6 8.9 14.1 9.3 8.9 6.9 6.9 3.2 4.5 4.5 4.3 3.7 3.6 3.9 6.6 7.3 7.0 5.1 5.7 6.0 4.4 5.5 4.7 5.5 6.7 3.1 3.0 2.3 1.7 0.9

Commercial paper 47.2% 55.4 56.0 52.3 54.6 62.3 65.5 60.1 57.7 52.6 53.4 52.5 51.0 52.0 48.7 49.2 50.9 41.7 40.1 35.6 33.9 38.5 39.6 36.9 34.1 28.1 24.3 24.6 23.1 23.9 23.0 23.4

Bank notes1 – – – – – – – – – – 2.4% 3.7 2.3 3.2 3.9 3.1 3.6 1.5 1.4 2.0 2.6 2.3 2.2 4.0 3.1 2.9 3.2 2.7 3.5 2.7 1.6 2.0 Corporate notes 2 – – – – – – – – – – – – – – 5.8% 8.4 10.5 11.1 12.0 16.2 17.9 17.9 21.6 16.7 9.3 6.4 6.2 4.5 3.5 4.2 3.9 3.0

Other assets 3 13.1% 9.5 9.3 9.4 9.4 7.1 4.7 5.8 7.4 13.3 12.7 12.7 13.5 14.8 9.6 10.4 6.5 4.5 4.2 4.6 4.9 4.0 5.2 6.3 3.8 4.8 5.8 7.1 6.1 5.7 3.5 2.3

2 Prior to 1998,

bank notes are included in other assets. 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.

$157,951 151,849 164,610 187,087 210,897 283,939 305,189 314,346 300,310 312,701 352,972 449,829 540,146 647,005 854,061 1,079,523 1,243,598 1,564,598 1,535,621 1,339,689 1,209,995 1,291,119 1,542,584 1,857,280 1,848,349 1,809,923 1,618,488 1,429,178 1,476,993 1,485,187 1,453,071 1,273,390

Millions of dollars

Total net assets

1 Prior to 1994,

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

Asset Composition of Taxable Prime Money Market Funds as a Percentage of Total Net Assets

TABLE 41

DATA SECTION 4

42 42 42 34 32 43 48 56 59 58 38 60 56 57 58 49 53 58 54 59 41 38 49 44 47 50 44 40 45 46 44 31

Days

Average maturity

$41,504 31,276 58,317 112,951 129,167 148,873 220,211 239,457 227,172

181 204 208 243 301 337 364 437 488

2007 2008 2009 2010 2011 2012 2013 2014 2015

2007 2008 2009 2010 2011 2012 2013 2014 2015

126 138 132 139 149 154 153 167 176

$20,343 17,097 24,432 32,620 33,729 41,045 50,193 58,766 51,718

Domestic

$18,619 12,574 28,892 55,078 64,171 80,421 110,367 102,491 110,353

16 22 24 24 39 35 42 52 57

Year-end

21 27 34 52 79 111 130 159 188

Number of funds

$1,149 431 3,355 1,776 3,987 3,897 6,666 7,920 10,907

Millions of dollars, year-end

Total net assets

World

Hybrid funds

18 17 18 20 23 23 23 26 29

$1,392 1,174 1,638 1,796 2,136 2,145 1,862 2,288 2,337

Multisector

– – – 8 11 14 16 33 38

– – – $21,680 25,143 21,366 51,124 67,993 51,857

World

Bond funds

426 499 507 649 800 903 1,012 1,243 1,347

-$780 -1,239 21,025 36,448 15,838 12,026 64,028 22,443 -15,343

Total

296 320 300 330 350 361 366 408 416

$445 -1,013 7,241 7,295 -3,747 6,088 9,804 6,959 -5,848

Domestic

Hybrid funds

35 58 65 72 103 85 104 145 157

Year-end

-$632 208 10,789 14,930 14,798 4,358 23,493 -1,093 3,051

54 80 98 157 238 340 412 502 572

Number of share classes

-$47 -446 2,572 726 954 822 2,054 1,298 2,618

Millions of dollars, annual

Net new cash flow*

World

Equity funds

* 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.

Total

Year

Equity funds

Alternative Strategies Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes

TABLE 42

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

213

41 41 44 52 52 52 48 64 66

-$546 12 424 241 420 -46 116 123 -186

Multisector

– – – 38 57 65 82 124 136

– – – $13,256 3,412 803 28,560 15,156 -14,978

World

Bond funds

TABLE 43

Emerging Markets Debt Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes Total net assets

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, year-end

$2,442 2,129 2,585 4,297 5,543 7,590 12,963 16,966 13,589 19,739 37,888 45,009 75,322 64,668 58,881 44,812

Net new cash flow*

Millions of dollars, annual

-$288 -412 311 691 635 1,245 2,193 2,275 257 2,016 14,902 12,569 19,891 -4,701 -5,627 -10,721

Number of funds

Number of share classes

23 24 22 19 19 18 23 28 31 33 36 48 66 88 103 97

48 50 46 43 43 42 60 79 98 104 126 165 217 291 351 355

Year-end

Year-end

DATA SECTION 5

* 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.

214

2016 INVESTMENT COMPANY FACT BOOK

TABLE 44

Floating-Rate High-Yield Bond Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes Total net assets

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net new cash flow*

Millions of dollars, year-end

Millions of dollars, annual

$23,791 19,718 13,392 14,968 24,032 27,485 33,620 33,667 17,128 28,330 47,109 59,877 76,619 140,898 118,254 93,332

-$2,626 -5,114 -5,792 -310 7,449 2,195 5,445 -2,448 -8,170 4,362 15,041 10,158 10,625 59,580 -22,232 -22,628

Number of funds

Number of share classes

16 23 22 20 23 25 23 29 31 31 32 38 41 51 52 56

30 56 52 49 62 73 84 103 126 122 127 156 169 199 203 225

Year-end

Year-end

* 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.

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

215

216

2016 INVESTMENT COMPANY FACT BOOK

Total $1,426 2,313 3,722 5,403 6,170 9,063 13,404 21,480 35,368 48,310 56,911 63,385 68,960 123,029 199,197 305,749 469,377 638,073 469,333 680,121 914,743 1,035,850 1,269,378 1,558,494 1,693,357 1,721,622

Equity $211 403 651 900 1,367 2,288 4,596 7,305 11,862 18,250 11,919 11,159 10,311 19,367 27,729 41,279 70,897 96,660 42,860 55,266 80,580 80,700 93,075 128,782 128,171 137,237

Net new cash flow2

Total $131 475 1,134 1,160 567 1,135 2,457 3,380 6,376 6,572 10,401 8,929 11,593 29,859 50,481 79,550 101,347 126,407 60,480 70,169 118,374 119,741 93,915 109,706 68,584 58,086

Equity -$21 97 205 154 342 633 1,572 1,552 1,951 3,400 3,146 1,313 1,532 3,006 5,260 5,885 13,782 17,276 5,712 4,146 4,964 3,011 -2,651 12,621 11,706 9,095

Hybrid and bond $152 378 929 1,006 225 503 885 1,828 4,426 3,171 7,255 7,617 10,061 26,853 45,222 73,665 87,565 109,131 54,768 66,022 113,410 116,730 96,566 97,084 56,878 48,991

Millions of dollars, annual

of funds are mutual funds that invest primarily in other mutual funds. 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.

2 Net

1 Funds

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Hybrid and bond $1,215 1,910 3,072 4,503 4,803 6,774 8,808 14,175 23,506 30,060 44,992 52,226 58,649 103,662 171,469 264,470 398,480 541,413 426,473 624,856 834,164 955,151 1,176,304 1,429,713 1,565,185 1,584,385

Millions of dollars, year-end

Total net assets

Total 20 20 21 24 32 36 45 94 175 212 215 213 268 299 372 472 598 704 839 945 980 1,085 1,154 1,257 1,331 1,404

Equity 11 10 10 12 15 19 24 38 72 80 58 58 68 70 69 90 119 124 123 131 147 158 164 174 175 180

Year-end

Number of funds Hybrid and bond 9 10 11 12 17 17 21 56 103 132 157 155 200 229 303 382 479 580 716 814 833 927 990 1,083 1,156 1,224

Funds of Funds:1 Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes

TABLE 45

DATA SECTION 5

Total 20 20 21 24 32 37 56 148 305 394 414 450 625 716 957 1,292 1,849 2,331 2,782 3,051 3,140 3,407 3,737 4,003 4,239 4,569

Equity 11 10 10 12 15 19 28 55 109 134 95 94 118 118 126 185 258 295 312 325 348 362 410 417 420 449

Year-end

Hybrid and bond 9 10 11 12 17 18 28 93 196 260 319 356 507 598 831 1,107 1,591 2,036 2,470 2,726 2,792 3,045 3,327 3,586 3,819 4,120

Number of share classes

217

Equity $68 192 371 358 583 987 2,321 2,765 4,247 6,722 5,493 3,914 4,937 5,914 9,285 11,395 22,354 33,410 25,028 19,788 21,531 20,730 18,465 33,319 34,767 39,372

Hybrid and bond $348 580 1,246 1,594 1,197 1,376 2,201 3,553 8,684 10,028 18,599 18,663 23,256 41,006 67,392 111,349 140,679 193,567 185,773 170,723 268,904 329,907 312,071 369,145 374,386 416,734

Total $351 579 1,255 1,533 1,341 1,750 3,621 4,753 9,938 12,759 18,607 17,606 23,063 38,406 63,004 105,973 138,808 193,640 181,189 171,433 265,197 322,898 304,536 362,400 368,559 403,874

Equity $58 142 294 293 389 692 1,847 1,957 3,446 5,458 4,493 3,255 4,149 4,824 7,409 9,035 17,618 26,126 20,752 18,309 20,330 19,619 17,100 30,718 32,827 37,345

New3

Sales Hybrid and bond $293 437 961 1,240 952 1,059 1,774 2,796 6,492 7,301 14,114 14,351 18,914 33,582 55,595 96,938 121,190 167,515 160,437 153,123 244,868 303,279 287,436 331,682 335,732 366,529 Total $65 194 362 419 439 612 901 1,565 2,993 3,990 5,485 4,971 5,131 8,515 13,674 16,771 24,225 33,336 29,613 19,079 25,237 27,739 26,001 40,064 40,594 52,232

Equity $10 50 76 65 194 295 474 808 801 1,263 1,000 659 789 1,090 1,876 2,360 4,736 7,285 4,276 1,479 1,201 1,112 1,366 2,601 1,940 2,028

Hybrid and bond $55 143 286 354 245 317 428 757 2,192 2,727 4,485 4,312 4,342 7,425 11,798 14,411 19,489 26,052 25,337 17,600 24,036 26,628 24,635 37,463 38,654 50,205

Exchange 4 Total $285 298 483 793 1,213 1,227 2,066 2,937 6,554 10,178 13,690 13,647 16,600 17,062 26,196 43,194 61,686 100,569 150,321 120,343 172,060 230,897 236,622 292,759 340,569 398,020

Equity $89 95 166 205 241 354 749 1,213 2,296 3,321 2,347 2,601 3,405 2,909 4,026 5,510 8,572 16,134 19,316 15,642 16,567 17,720 21,116 20,698 23,061 30,277

Hybrid and bond $196 203 318 588 972 873 1,317 1,725 4,258 6,856 11,344 11,046 13,195 14,153 22,171 37,685 53,114 84,435 131,006 104,701 155,494 213,177 215,505 272,061 317,508 367,743

Regular + exchange Total $186 185 303 453 682 768 1,290 1,749 3,766 6,638 9,250 9,546 12,209 12,785 19,742 35,168 48,972 81,898 119,872 102,091 150,065 202,789 211,417 259,712 289,442 338,929

Equity $87 79 130 156 166 233 519 768 1,490 2,465 1,925 2,018 2,875 2,452 3,459 4,747 7,182 13,073 16,056 14,236 15,167 16,237 19,615 19,202 21,681 28,239

Regular5 Hybrid and bond $99 105 174 297 517 535 771 981 2,277 4,173 7,325 7,528 9,335 10,333 16,283 30,421 41,790 68,825 103,816 87,855 134,898 186,552 191,802 240,510 267,761 310,690

Redemptions

Total $100 113 180 340 531 459 776 1,189 2,788 3,540 4,440 4,101 4,391 4,277 6,455 8,027 12,714 18,671 30,449 18,252 21,996 28,108 25,205 33,046 51,127 59,091

Equity $3 16 36 49 75 121 230 445 807 856 422 583 530 456 567 763 1,390 3,061 3,260 1,406 1,400 1,483 1,501 1,496 1,380 2,038

3 New

Hybrid and bond $97 97 144 291 456 338 546 744 1,981 2,684 4,019 3,518 3,861 3,820 5,888 7,264 11,324 15,610 27,190 16,845 20,596 26,625 23,704 31,551 49,748 57,053

Exchange 6

of funds are mutual funds that invest primarily in other mutual funds. flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 within the same fund group. Note: Components may not add to the total because of rounding.

Total $416 772 1,617 1,953 1,781 2,362 4,522 6,317 12,931 16,749 24,092 22,577 28,194 46,920 76,677 122,744 163,033 226,977 210,801 190,511 290,435 350,637 330,536 402,464 409,154 456,106

2 Net new cash

1 Funds

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

New + exchange

Millions of dollars, annual

Funds of Funds:1 Components of Net New Cash Flow2

TABLE 46

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

218

2016 INVESTMENT COMPANY FACT BOOK

Total $27,805 32,573 57,042 97,759 170,302 264,998 387,411 384,039 370,560 327,417 455,293 554,044 618,699 747,491 854,715 619,474 835,422 1,016,713 1,093,749 1,311,077 1,733,629 2,053,656 2,207,297

S&P 500 $19,790 22,752 41,744 73,856 129,857 201,791 284,588 272,462 249,452 200,989 273,691 317,826 334,012 379,765 394,593 252,956 328,647 375,949 376,582 429,698 574,380 669,483 691,070

Total $6,428 3,348 11,815 24,780 34,847 46,143 61,603 25,592 26,735 25,255 35,234 40,130 27,877 32,974 61,139 48,624 59,928 57,560 54,828 59,043 114,376 149,070 165,870

S&P 500 $3,994 1,871 8,820 18,447 25,208 30,977 38,063 10,783 9,113 4,818 14,231 11,739 -317 -5,908 -1,440 7,666 8,195 -808 -6,869 -7,139 5,541 12,567 14,788

Other domestic $953 515 1,038 3,192 5,230 8,499 16,102 10,668 8,859 12,153 16,538 16,078 11,731 20,134 29,193 23,337 16,646 15,024 24,600 22,134 46,541 49,009 32,311

World $1,281 2,095 2,846 4,124 5,329 7,962 13,130 12,645 11,128 11,050 18,218 28,236 42,792 66,647 95,695 67,871 92,507 122,751 121,445 161,212 215,545 242,925 303,007

Equity funds

Other domestic $3,338 3,863 6,442 11,241 21,221 35,051 63,386 72,009 73,598 69,426 112,480 147,819 171,377 218,166 257,850 177,975 256,365 325,276 357,625 439,633 638,869 768,289 795,436 Hybrid and bond $3,396 3,863 6,009 8,538 13,895 20,193 26,307 26,923 36,381 45,952 50,903 60,163 70,518 82,913 106,577 120,672 157,903 192,736 238,098 280,534 304,835 372,959 417,784

Equity funds

Annual

Net new cash flow*

Year-end

Total net assets

World $501 436 512 1,033 818 1,568 2,241 1,664 1,181 1,669 2,199 5,661 8,456 10,674 16,915 7,697 7,951 19,076 17,202 15,523 28,309 38,403 74,961

Hybrid and bond $980 525 1,446 2,108 3,591 5,099 5,197 2,477 7,582 6,616 2,266 6,651 8,007 8,074 16,473 9,924 27,135 24,268 19,895 28,525 33,985 49,091 43,810

* 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.

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars

Index Mutual Funds: Total Net Assets and Net New Cash Flow

TABLE 47

DATA SECTION 5

Total 70 82 87 105 132 156 197 271 286 313 321 328 322 343 354 360 357 365 382 372 371 383 406

S&P 500 39 43 48 60 72 86 97 120 126 132 128 127 119 125 125 122 113 111 111 103 96 95 95

S&P 500 43 54 63 86 115 148 166 221 238 255 253 262 258 272 276 278 259 253 260 247 234 232 234

Other domestic 15 17 19 25 38 52 95 163 197 221 243 269 279 303 312 316 291 301 337 349 364 403 433 Total 74 96 110 143 205 252 323 465 518 578 601 633 647 699 735 755 756 776 856 871 881 909 967

Other domestic 15 17 18 22 27 37 59 99 110 124 134 146 147 157 159 163 151 161 169 166 171 183 194 World 6 7 7 7 12 15 20 26 24 28 30 28 29 33 37 42 49 50 57 58 58 58 64

Equity funds

Equity funds Hybrid and bond 10 15 14 16 21 18 21 26 26 29 29 27 27 28 33 33 44 43 45 45 46 47 53

Number of share classes

Number of funds

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

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

Index Mutual Funds: Number of Funds and Number of Share Classes

TABLE 48

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

219

World 6 10 11 11 21 25 31 43 43 53 56 55 62 70 83 96 107 121 144 153 156 148 162

Hybrid and bond 10 15 17 21 31 27 31 38 40 49 49 47 48 54 64 65 99 101 115 122 127 126 138

220

2016 INVESTMENT COMPANY FACT BOOK

S&P 500 $9,029 8,106 15,916 31,829 54,494 75,186 101,675 92,019 72,936 68,085 67,688 74,967 70,763 69,619 93,691 87,082 69,398 70,013 93,679 93,429 111,144 142,880 144,544

Total $11,308 10,257 17,669 34,903 54,093 79,382 112,686 107,344 94,018 99,640 104,703 128,162 131,335 152,437 200,041 203,402 182,247 212,865 268,319 277,651 345,802 437,048 511,663 S&P 500 $7,926 7,187 13,095 26,165 41,160 59,457 81,540 75,990 58,654 57,060 54,472 63,371 58,818 59,125 76,300 74,132 60,024 59,437 80,167 79,206 95,555 121,824 125,770

Other domestic World $1,283 $455 1,130 579 1,883 800 4,182 1,463 6,562 1,816 11,406 2,157 18,994 3,232 20,141 4,863 20,960 3,946 24,922 4,505 31,681 5,178 40,622 7,915 43,402 11,275 57,381 16,061 71,958 23,650 64,725 24,545 52,130 19,915 64,649 32,063 83,055 36,824 89,369 35,357 119,032 50,086 153,388 62,364 166,956 107,144

Equity funds Hybrid and bond $2,064 1,767 2,811 4,103 6,388 9,128 12,608 9,225 16,612 20,295 18,550 20,992 22,684 27,074 43,102 54,099 82,744 74,078 85,081 90,496 115,619 117,577 132,932

Equity funds

Other domestic World $1,560 $746 1,283 824 2,107 1,019 4,893 1,855 10,219 2,173 15,515 3,014 26,755 4,544 29,049 6,091 28,055 4,643 34,211 5,161 44,593 5,998 53,947 9,403 56,374 13,523 73,333 19,890 92,086 30,539 82,141 29,733 66,309 25,752 84,010 50,914 107,165 44,919 110,994 44,029 146,421 59,647 179,064 72,752 195,687 121,269

New1

New + exchange Hybrid and bond $1,644 1,361 1,891 3,093 4,555 6,362 8,920 6,351 10,458 13,154 13,372 16,254 17,840 19,871 28,133 40,000 50,177 56,717 68,274 73,720 81,129 99,473 111,794 Total $2,091 1,723 4,184 7,776 19,181 23,461 32,896 29,041 28,229 28,112 32,127 31,148 32,009 37,478 59,378 49,654 61,956 66,151 62,526 61,296 87,028 75,225 82,767 S&P 500 $1,104 919 2,821 5,664 13,334 15,728 20,135 16,029 14,282 11,026 13,216 11,597 11,945 10,494 17,391 12,951 9,374 10,577 13,512 14,223 15,588 21,056 18,773

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. 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.

Total $13,399 11,980 21,853 42,680 73,274 102,843 145,582 136,385 122,247 127,752 136,830 159,310 163,344 189,915 259,419 253,056 244,203 279,015 330,845 338,948 432,830 512,273 594,431

2 Exchange

1 New

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, annual

Index Mutual Funds: New Sales and Exchange Sales

TABLE 49

DATA SECTION 5

Other domestic $277 153 224 711 3,657 4,109 7,761 8,908 7,096 9,289 12,913 13,325 12,972 15,953 20,129 17,416 14,178 19,361 24,110 21,625 27,389 25,677 28,731

Equity funds

Exchange2

World $291 245 219 392 357 857 1,312 1,229 697 656 820 1,488 2,248 3,829 6,889 5,188 5,837 18,851 8,096 8,672 9,561 10,388 14,125

Hybrid and bond $420 405 920 1,010 1,834 2,767 3,688 2,875 6,154 7,141 5,178 4,739 4,844 7,203 14,969 14,099 32,567 17,362 16,807 16,776 34,490 18,104 21,138

Total $6,971 8,632 10,038 17,900 38,427 56,700 83,979 110,793 95,512 102,497 101,596 119,180 135,467 156,941 198,280 204,432 184,275 221,455 276,017 279,905 318,454 363,204 428,561

World $245 387 507 822 1,355 1,446 2,303 4,427 3,462 3,493 3,800 3,742 5,067 9,215 13,625 22,036 17,801 31,839 27,717 28,506 31,338 34,349 46,308

Total $5,304 7,177 7,721 13,578 24,753 40,024 60,809 80,788 68,474 74,963 76,804 90,044 102,053 118,531 141,059 156,303 129,835 162,504 219,553 212,633 248,683 308,645 367,242 World $118 243 337 566 779 973 1,276 2,816 2,597 2,820 3,407 3,061 4,108 6,775 10,081 16,547 14,348 14,737 20,333 21,662 25,139 28,142 38,972

Hybrid and bond $715 863 711 1,253 1,681 2,232 4,146 4,278 5,353 8,296 10,035 9,756 11,036 13,089 16,764 34,288 27,525 35,991 52,689 49,071 53,100 58,073 76,016 Total $1,667 1,455 2,316 4,321 13,674 16,676 23,170 30,005 27,038 27,534 24,792 29,136 33,414 38,410 57,221 48,129 54,440 58,952 56,464 67,273 69,772 54,559 61,320 S&P 500 $1,014 810 1,358 3,052 9,462 11,646 15,276 19,501 16,030 14,642 10,643 12,888 16,459 15,971 23,726 17,093 11,409 13,828 18,671 20,946 16,272 17,795 17,642

Other domestic $158 123 135 271 2,520 2,760 3,603 6,422 6,465 6,835 7,508 10,982 12,356 14,088 20,086 15,660 11,495 14,203 17,911 26,582 18,768 20,144 23,237

Equity funds

Exchange2

World $127 144 170 256 576 473 1,027 1,611 865 673 393 681 959 2,441 3,544 5,489 3,453 17,102 7,384 6,844 6,199 6,207 7,336

Hybrid and bond $369 379 654 743 1,116 1,797 3,265 2,471 3,677 5,383 6,249 4,585 3,641 5,910 9,865 9,887 28,084 13,819 12,497 12,901 28,534 10,413 13,106

redemptions are the dollar value of shareholder liquidation of mutual fund shares. redemptions are the dollar value of mutual fund shares switched out of funds and into other 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.

2 Exchange

1 Regular

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Other S&P 500 domestic $4,022 $449 5,426 645 5,738 935 10,330 1,429 19,825 2,469 32,563 4,256 48,336 7,050 61,735 11,959 47,792 12,731 48,625 15,223 42,814 20,548 50,340 26,886 54,621 32,287 59,556 39,112 71,405 42,808 62,324 43,144 49,794 38,167 56,993 54,782 81,877 64,654 79,623 62,278 89,331 81,112 112,519 109,911 112,114 140,139

Equity funds Hybrid and bond $1,084 1,241 1,365 1,995 2,797 4,029 7,411 6,749 9,030 13,679 16,284 14,341 14,677 18,999 26,630 44,175 55,609 49,810 65,187 61,971 81,634 68,486 89,122

Equity funds

Other S&P 500 domestic $5,036 $607 6,236 768 7,096 1,069 13,382 1,700 29,286 4,989 44,208 7,016 63,612 10,653 81,237 18,381 63,823 19,196 63,267 22,059 53,457 28,056 63,228 37,869 71,080 44,643 75,527 53,200 95,131 62,894 79,416 58,804 61,203 49,663 70,821 68,985 100,548 82,565 100,568 88,860 105,603 99,880 130,313 130,056 129,756 163,376

Regular1

Regular + exchange

Millions of dollars, annual

Index Mutual Funds: Redemptions and Exchange Redemptions

TABLE 50

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

221

TABLE 51

Inflation-Protected and Treasury Inflation-Protected Mutual Funds: Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes Total

Treasury inflationprotected

Inflationprotected

Total

$108,438 133,330 150,342 108,160 107,328 105,776

2010 2011 2012 2013 2014 2015

59 63 68 69 65 68

Millions of dollars, year-end

$98,326 120,065 137,116 95,942 92,360 86,206 Number of funds

Millions of dollars, annual

$10,112 13,266 13,226 12,218 14,968 19,570

$9,181 11,425 7,338 -31,504 -3,089 -976

9 11 12 12 9 9

200 217 234 242 232 258

Year-end

50 52 56 57 56 59

Treasury inflationprotected

Net new cash flow*

Total net assets

Year 2010 2011 2012 2013 2014 2015

Inflationprotected

$7,346 $1,835 9,900 1,525 8,289 -951 -31,383 -120 -5,869 2,780 -5,821 4,845 Number of share classes Year-end

170 183 197 205 205 230

30 34 37 37 27 28

DATA SECTION 5

* 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.

222

2016 INVESTMENT COMPANY FACT BOOK

223

Small cap -$1,510 -2,380 -3,781 -4,434 -3,970 1,860 -1,783 -5,467 -6,430 3,136 -10,104 -3,204

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Large cap $365,645 377,231 379,207 393,968 225,666 295,647 328,493 327,906 386,194 508,170 554,856 563,088

Mid cap -$6,726 -6,191 -8,471 -704 -9,602 -993 -1,116 -6,713 -5,394 -2,942 -15,150 -11,724

Large cap -$10,973 -16,583 -18,896 -27,204 -13,915 -9,396 -12,751 6,620 1,627 -12,376 -16,671 -17,543

Growth funds

Mid cap $144,182 153,494 156,733 177,801 91,840 127,591 159,110 145,853 160,870 212,801 211,628 199,694

Multi cap $3,442 -3,324 4,041 9,005 -11,300 -9,317 -19,341 -33,673 -38,500 -16,672 -28,496 -21,516

Multi cap $348,495 381,045 414,190 480,751 275,749 364,987 397,753 354,792 377,054 490,835 507,123 508,747

Small cap $7,451 2,970 3,653 -4,619 -1,936 1,124 1,313 -4,981 -8,699 -3,930 -10,199 -13,995

Small cap $97,716 108,707 130,100 122,045 78,536 104,214 130,444 120,523 133,265 175,869 170,461 145,787

Year-end

Large cap $418,598 464,347 570,240 577,987 339,613 416,722 456,880 435,524 471,673 591,375 630,383 563,767

Mid cap $21,072 13,677 -1,544 -1,511 -8,764 2,486 375 -4,838 -7,296 2,864 -3,975 -7,453

Large cap $28,751 19,863 21,344 -4,610 -18,892 -7,584 -13,519 -18,593 -29,470 -25,901 -20,623 -43,245

Value funds

Annual

Net new cash flow*

Mid cap $111,824 135,441 155,866 158,450 88,564 121,027 146,334 135,540 152,976 209,657 221,981 200,397

Value funds

Total net assets

Multi cap $5,632 3,018 6,181 5,730 -15,187 -3,438 -2,275 -130 -10,684 14,452 9,049 -5,690

Multi cap $156,404 169,401 197,391 203,448 111,339 140,989 159,686 156,211 175,270 243,129 273,179 258,110

Small cap $8,729 3,312 885 -5,886 -7,609 1,383 150 -472 -6,223 7,768 -7,551 -4,113

Small cap $97,094 108,504 123,102 119,792 71,867 96,987 120,735 116,873 144,896 207,615 208,371 196,653

* 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.

Small cap $101,728 106,921 114,522 119,593 67,787 94,830 116,796 107,182 115,862 165,727 158,834 153,514

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Growth funds

Millions of dollars

Mutual Funds by Market Capitalization: Total Net Assets and Net New Cash Flow by Type of Fund

TABLE 52

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

Large cap $804,228 843,752 974,531 1,017,004 637,320 817,289 923,238 911,626 1,038,038 1,402,130 1,621,977 1,633,905

Mid cap $9,117 3,159 1,152 -4,612 -14,118 -1,019 -650 -5,656 -5,774 7,980 -2,099 -1,660

Large cap $12,460 -12,397 -14,435 -4,973 -3,444 3,485 -10,097 -12,230 -10,905 29,365 40,280 4,324

Blend funds

Mid cap $146,278 164,955 193,651 202,391 109,537 149,165 182,499 172,318 192,146 265,990 287,573 279,240

Blend funds

Multi cap $18,639 8,807 6,444 -4,918 -31,176 -16,841 -29,813 -42,220 -41,294 -11,486 -23,874 -44,242

Multi cap $645,668 701,795 807,898 873,932 493,352 632,531 687,874 629,791 699,030 907,960 965,078 925,211

224

2016 INVESTMENT COMPANY FACT BOOK

Small cap 657 675 688 653 652 606 580 591 581 560 560 549

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Large cap 412 406 390 351 348 331 318 311 301 289 290 288

Mid cap 671 686 698 699 692 631 607 589 565 552 553 559

Large cap 1,033 1,042 1,023 960 1,004 957 921 909 896 879 892 909

Growth funds

Mid cap 255 255 256 245 244 219 206 197 188 179 178 178

Growth funds

Multi cap 592 593 592 544 548 530 516 489 470 481 461 468

Multi cap 247 243 232 209 208 190 180 168 163 164 159 161

Small cap 474 524 558 582 595 560 561 582 598 593 610 629

Small cap 193 208 214 219 221 202 197 203 209 205 213 215

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

Small cap 258 266 267 246 237 213 207 204 198 191 188 183

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year-end

Large cap 384 397 398 400 395 369 358 339 329 322 325 324

Mid cap 409 447 502 533 563 530 540 543 547 552 590 597

Large cap 972 1,048 1,075 1,106 1,109 1,024 1,025 994 956 949 981 1,000

Value funds

Number of share classes

Mid cap 156 166 185 196 202 191 186 182 179 176 186 188

Value funds

Number of funds

Multi cap 496 507 512 532 551 503 516 545 570 599 621 603

Multi cap 195 199 199 200 203 190 192 201 211 213 218 213

Small cap 414 439 451 480 471 450 431 436 438 478 521 570

Small cap 176 182 187 196 186 177 171 173 167 179 188 199

Mutual Funds by Market Capitalization: Number of Funds and Number of Share Classes by Type of Fund

TABLE 53

DATA SECTION 5

Large cap 504 482 497 490 491 464 458 440 420 414 418 425

Mid cap 325 343 353 374 405 383 360 382 378 366 355 357

Large cap 1,224 1,205 1,266 1,257 1,303 1,249 1,236 1,224 1,184 1,186 1,216 1,247

Blend funds

Mid cap 137 139 142 146 149 140 134 140 136 131 129 135

Blend funds

Multi cap 620 654 679 684 708 718 700 689 709 735 740 771

Multi cap 256 255 257 254 253 245 234 225 225 228 233 233

TABLE 54

Sector Mutual Funds: Total Net Assets and Net New Cash Flow by Type of Fund Millions of dollars

Total net assets Year-end

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Consumer Financial $1,042 $16,087 1,290 13,901 1,096 10,885 1,436 13,138 1,631 12,917 1,405 11,837 1,928 12,269 2,147 8,518 1,776 4,857 2,439 5,941 3,113 6,286 3,546 4,548 4,675 5,901 6,431 9,285 7,017 9,415 9,514 10,222

Health $45,921 40,545 30,087 36,803 40,147 45,398 44,744 43,967 31,337 32,440 32,507 35,884 44,105 74,767 103,447 124,538

Natural resources $2,955 2,429 2,230 3,307 5,844 12,048 14,723 22,312 9,967 17,496 22,853 20,998 22,041 30,960 36,904 29,232

Precious metals $1,108 1,276 2,431 4,158 4,215 6,928 9,741 11,804 7,776 14,785 22,926 17,029 15,293 6,790 6,005 4,477

Real estate $11,675 13,509 17,745 31,653 49,927 59,158 81,329 53,738 33,503 44,126 55,120 60,155 75,340 77,363 104,288 101,459

Technology/ Telecom Utilities $103,853 $22,908 62,339 17,744 31,308 11,275 46,929 13,481 42,403 19,201 34,366 28,390 32,891 34,589 34,169 45,669 16,331 23,240 27,610 30,327 30,738 33,332 26,680 34,785 28,570 35,400 41,486 40,149 45,358 41,556 47,088 32,516

Other sectors $3,917 2,940 2,082 2,412 2,974 3,189 3,950 4,826 1,766 2,986 4,597 3,906 5,001 8,173 8,969 7,006

Technology/ Telecom $43,837 -4,458 -6,211 73 -6,165 -8,541 -4,456 -2,745 -3,847 1,768 -1,391 -2,346 -1,515 1,972 85 288

Other sectors -$187 -198 -288 -145 148 121 -49 257 -488 386 724 -286 173 977 91 -1,510

Net new cash flow* Annual

Consumer Financial -$122 -$534 254 -962 11 -1,603 9 -940 3 -1,535 -209 -1,586 29 -1,017 94 -2,617 209 96 82 -457 101 -626 262 -885 544 56 794 859 47 -256 2,235 978

Health $9,256 236 -2,895 -767 -387 836 -4,137 -3,378 -3,025 -3,163 -2,407 478 1,385 8,582 7,645 11,007

Precious metals -$203 -28 480 456 419 1,016 717 -214 832 2,249 2,353 -1,336 152 -1,425 -165 -37

Real estate $339 430 3,612 5,177 7,050 3,000 4,395 -15,282 1,791 492 1,746 1,018 4,490 315 5,279 -4,552

Utilities $1,015 -953 -2,076 -292 1,571 3,311 556 1,992 -3,397 254 -848 701 -1,994 -1,409 3,783 -2,585

DATA SECTION 5

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Natural resources $236 -182 -70 327 1,414 3,483 789 1,724 -268 1,767 1,470 1,193 564 5,411 5,823 -654

* 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.

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

225

TABLE 55

Sector Mutual Funds: Number of Funds and Number of Share Classes by Type of Fund Year-end

Number of funds Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Consumer Financial 7 34 9 41 12 42 11 38 14 40 14 41 18 40 19 40 19 38 19 36 19 35 19 32 20 33 19 32 19 31 19 31

Health 38 57 63 58 59 53 57 52 48 41 38 34 35 35 34 34

Natural resources 19 18 15 16 17 18 20 20 21 20 21 26 28 32 36 44

Precious metals 11 10 11 11 11 11 12 11 11 11 11 10 11 11 11 11

Real estate 74 75 79 91 94 93 97 96 92 90 87 83 84 87 87 90

Technology/ Telecom 132 155 145 124 115 103 108 98 88 79 74 69 66 68 67 67

Utilities 34 40 35 33 34 32 38 39 41 37 35 33 36 41 37 39

Other sectors 16 17 19 19 20 19 23 25 22 23 21 21 24 24 24 24

Technology/ Telecom 283 350 348 290 279 260 267 249 218 199 190 184 182 188 181 180

Utilities 75 89 91 88 91 94 107 113 117 105 96 89 100 109 96 101

Other sectors 23 25 28 28 29 27 37 42 33 41 36 36 43 44 40 39

DATA SECTION 5

Number of share classes Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Consumer Financial 12 73 17 88 22 92 19 85 27 92 26 95 33 93 41 95 42 91 42 80 42 79 43 72 47 73 41 72 41 70 39 70

Health 91 145 171 155 159 137 147 133 124 101 97 80 83 83 80 80

Natural resources 33 32 26 33 34 38 41 47 52 50 54 75 85 97 106 141

Precious metals 19 21 24 26 27 27 30 34 37 37 38 33 36 34 34 34

Real estate 151 156 172 214 238 240 246 252 246 246 246 238 241 256 266 281

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

226

2016 INVESTMENT COMPANY FACT BOOK

Target date $487 805 1,408 4,508 7,014 8,788 12,372 14,902 25,901 43,756 71,223 114,560 182,905 159,828 255,590 339,772 375,810 480,743 618,016 702,632 762,540

Lifestyle $2,259 5,693 12,906 20,905 27,835 30,928 33,095 34,523 55,832 85,414 130,794 189,034 237,958 175,591 230,950 264,155 262,046 292,588 358,789 394,744 372,001

Total $1,194 2,583 4,138 6,015 4,928 7,581 7,696 8,095 19,040 28,336 57,166 66,792 91,920 54,424 52,116 48,615 40,473 50,288 55,282 41,676 52,682

Target date $185 216 193 1,153 1,311 3,598 3,795 3,709 7,221 12,903 22,256 33,023 56,200 41,897 43,442 44,431 41,557 52,948 52,968 44,583 66,223

Net new cash flow2

Lifestyle $1,009 2,367 3,945 4,862 3,618 3,983 3,902 4,387 11,819 15,433 34,910 33,769 35,720 12,527 8,674 4,184 -1,084 -2,660 2,314 -2,908 -13,541

Millions of dollars, annual

Total 26 44 77 110 130 146 147 171 192 241 324 422 494 613 643 638 676 684 762 799 840

2 Net

Target date 6 9 12 17 19 24 25 25 45 84 127 184 245 338 379 377 412 430 491 528 573

Year-end

Number of funds

data for funds that invest primarily in other mutual funds. 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.

Total $2,746 6,497 14,314 25,413 34,849 39,716 45,467 49,425 81,733 129,170 202,017 303,594 420,863 335,419 486,540 603,927 637,856 773,331 976,805 1,097,376 1,134,541

1 Categories include

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millions of dollars, year-end

Total net assets Lifestyle 20 35 65 93 111 122 122 146 147 157 197 238 249 275 264 261 264 254 271 271 267

Total 50 70 141 199 240 279 351 432 499 740 1,128 1,559 1,837 2,214 2,350 2,327 2,488 2,602 2,931 3,040 3,202

Year-end

Target date 10 9 17 23 30 42 82 82 120 263 465 783 1,035 1,366 1,513 1,491 1,620 1,754 2,031 2,142 2,301

Lifestyle 40 61 124 176 210 237 269 350 379 477 663 776 802 848 837 836 868 848 900 898 901

Number of share classes

Target Date and Lifestyle Mutual Funds:1 Total Net Assets, Net New Cash Flow, Number of Funds, and Number of Share Classes

TABLE 56

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

227

228

2016 INVESTMENT COMPANY FACT BOOK

Target date $282 622 513 1,306 1,831 4,267 4,787 5,282 8,084 16,442 26,754 39,913 76,155 78,539 80,328 107,619 131,659 143,656 171,407 186,196 239,068

Lifestyle $1,008 2,771 5,067 7,549 8,832 10,767 10,621 12,953 19,498 25,228 50,358 49,584 61,517 48,978 38,138 42,356 40,887 39,155 46,415 54,067 40,160

Sales Total $364 564 1,067 2,782 3,144 4,621 4,179 3,691 5,321 8,713 11,647 17,113 23,456 22,099 15,172 20,606 22,271 19,668 30,991 33,593 45,529

Target date $9 12 33 1,354 1,707 2,845 2,576 2,307 3,390 5,474 7,692 11,157 17,041 16,120 11,554 16,623 17,914 15,988 25,303 28,093 40,478

Exchange 4 Lifestyle $355 552 1,033 1,428 1,436 1,776 1,602 1,384 1,931 3,239 3,955 5,956 6,415 5,979 3,618 3,983 4,356 3,680 5,687 5,500 5,051

Total $304 989 1,763 3,557 6,102 8,302 8,510 10,901 11,038 17,571 25,919 31,232 56,638 73,878 68,193 104,940 132,000 133,084 167,016 187,301 220,743

Target date $100 406 331 641 1,000 1,654 1,844 2,340 2,521 6,275 8,633 12,662 28,507 38,386 39,388 67,373 90,802 92,070 121,592 129,048 166,728

Regular5 Lifestyle $203 583 1,432 2,916 5,102 6,648 6,665 8,561 8,518 11,296 17,287 18,571 28,131 35,492 28,805 37,567 41,198 41,014 45,424 58,253 54,015

Total $155 385 746 2,066 2,776 3,772 3,381 2,930 2,824 4,477 5,673 8,586 12,570 21,314 13,329 17,025 22,343 19,107 26,514 44,879 51,331

Redemptions

2 Net new cash

data for funds that invest primarily in other mutual funds. 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 within the same fund group. Note: Components may not add to the total because of rounding.

Total $1,289 3,393 5,580 8,856 10,663 15,034 15,408 18,235 27,581 41,670 77,111 89,497 137,672 127,517 118,467 149,974 172,546 182,811 217,821 240,263 279,227

1 Categories include

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

New3

Millions of dollars, annual

Target Date and Lifestyle Mutual Funds:1 Components of Net New Cash Flow2

TABLE 57

DATA SECTION 5

Target date $5 11 23 867 1,227 1,861 1,724 1,541 1,731 2,739 3,558 5,385 8,490 14,376 9,053 12,437 17,215 14,626 22,150 40,658 46,595

Exchange 6 Lifestyle $151 373 723 1,199 1,549 1,912 1,656 1,389 1,093 1,738 2,116 3,201 4,080 6,938 4,277 4,588 5,129 4,481 4,364 4,221 4,737

229

Total $28,749 91,056 109,868 152,403 176,370 259,813 349,341 473,331 615,152 818,958 816,800 742,258 638,949 837,443 973,910 1,072,894 1,266,934 1,398,318 928,693 1,187,610 1,339,959 1,299,386 1,444,379 1,671,751 1,710,993 1,637,860

Equity $14,974 69,138 80,934 104,823 121,153 187,702 260,959 364,286 474,961 656,877 652,421 558,654 438,603 619,018 738,444 822,105 975,532 1,052,868 598,524 792,083 886,357 800,129 875,004 1,050,470 1,065,125 1,006,711

Total $3,083 6,174 12,884 26,088 22,066 20,824 40,133 40,470 44,259 38,543 48,461 21,583 -1,286 29,827 33,505 16,404 29,712 31,780 -6,059 10,033 -1,996 -21,121 -31,604 -53,709 -67,342 -64,971

Equity $1,866 5,097 8,708 16,423 15,998 18,604 32,699 33,743 27,857 30,736 58,314 4,861 -12,763 34,969 33,592 13,254 17,018 1,581 -30,615 -3,644 -25,375 -48,213 -55,367 -61,392 -58,536 -53,821

Money market $895 -420 -188 -169 2,305 5 2,371 411 6,040 8,267 -2,063 8,687 327 -12,071 -2,683 -1,299 5,501 7,251 19,538 -18,806 -9,711 136 -5,132 -2,638 -2,665 1,806 Total 331 354 366 428 507 665 800 937 1,162 1,353 1,562 1,750 1,903 1,889 1,881 1,882 1,926 1,900 1,897 1,830 1,773 1,738 1,726 1,735 1,730 1,707

Year-end

Equity 145 150 157 192 245 344 435 535 703 868 1,051 1,248 1,389 1,364 1,351 1,356 1,391 1,367 1,369 1,307 1,256 1,222 1,195 1,180 1,150 1,127

Hybrid and bond 134 147 151 176 202 250 290 323 377 404 431 413 422 437 443 443 454 455 449 450 447 452 471 498 524 527

Number of funds Money market 52 57 58 60 60 71 75 79 82 81 80 89 92 88 87 83 81 78 79 73 70 64 60 57 56 53

* 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.

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Hybrid and bond $323 1,498 4,363 9,834 3,763 2,214 5,063 6,316 10,362 -460 -7,790 8,035 11,151 6,929 2,595 4,449 7,192 22,948 5,018 32,483 33,090 26,956 28,895 10,321 -6,142 -12,956

Money market $5,420 8,184 7,888 7,841 10,878 12,069 15,193 16,474 23,853 33,732 33,037 44,756 48,070 35,652 33,361 33,699 42,192 52,723 74,971 57,296 48,554 48,873 43,932 39,792 37,124 39,043

Hybrid and bond $8,355 13,734 21,046 39,740 44,339 60,042 73,189 92,571 116,337 128,349 131,342 138,848 152,276 182,773 202,106 217,090 249,210 292,727 255,199 338,231 405,048 450,383 525,443 581,489 608,744 592,105

Net new cash flow*

Millions of dollars, annual

Millions of dollars, year-end

Total net assets

Variable Annuity Mutual Funds: Total Net Assets, Net New Cash Flow, and Number of Funds

TABLE 58

DATA SECTION 5

ADDITIONAL CATEGORIES OF MUTUAL FUNDS

230

2016 INVESTMENT COMPANY FACT BOOK

Total $9,994 16,408 24,779 42,392 48,010 53,101 84,933 105,222 141,464 212,025 334,936 346,166 342,193 283,007 261,715 246,396 280,246 343,465 380,350 312,904 337,926 331,923 310,832 298,319 258,332 267,750

Equity $4,714 9,034 13,294 22,738 25,661 31,661 53,188 67,005 83,457 130,900 222,945 197,831 183,758 169,043 170,082 162,387 191,872 218,138 198,130 150,971 164,882 144,679 128,108 142,685 132,904 137,142

Hybrid and Money bond market $1,808 $3,473 3,368 4,006 6,634 4,851 13,146 6,508 10,907 11,443 9,326 12,114 13,056 18,689 15,290 22,926 23,227 34,780 22,004 59,120 20,128 91,863 33,707 114,628 48,179 110,256 54,392 59,572 46,592 45,042 48,220 35,789 51,529 36,846 73,991 51,336 94,051 88,169 100,406 61,528 140,079 32,964 150,992 36,252 154,148 28,575 124,886 30,748 97,227 28,201 98,247 32,361

Sales

Total $1,082 838 1,568 1,131 7,017 8,674 12,656 24,210 37,136 40,818 36,326 31,716 34,170 28,791 26,407 19,598 22,318 37,045 25,445 22,650 17,325 16,269 14,248 23,205 9,591 16,468

Equity $450 331 740 576 4,064 4,984 7,190 13,017 18,967 22,080 22,822 15,928 16,428 15,307 14,396 10,599 10,823 19,701 11,112 14,589 6,755 6,816 10,720 14,353 4,669 6,576

Hybrid and bond $183 174 350 325 429 727 864 2,348 5,502 2,985 1,852 5,185 7,160 5,944 5,711 3,403 3,425 8,247 5,114 3,767 6,742 6,865 2,118 5,993 1,607 6,257

Exchange 3 Money market $449 333 478 230 2,525 2,963 4,602 8,846 12,668 15,753 11,652 10,604 10,583 7,540 6,300 5,595 8,070 9,097 9,220 4,294 3,828 2,589 1,410 2,859 3,316 3,635 Total $6,993 10,294 12,014 16,352 25,933 32,283 44,729 65,377 99,141 174,418 287,230 325,676 344,224 253,526 228,278 230,118 250,509 317,180 390,038 302,743 339,668 353,061 341,502 350,273 325,034 333,091

Equity $2,941 3,967 4,745 6,425 9,941 13,201 20,497 33,408 54,024 100,392 166,186 190,977 194,374 136,061 136,344 148,067 173,300 215,814 227,293 154,821 188,495 189,868 181,579 201,508 189,773 190,541

Total $1,000 778 1,450 1,084 7,029 8,668 12,726 23,586 35,199 39,883 35,571 30,623 33,425 28,445 26,340 19,472 22,344 31,550 21,816 22,778 17,578 16,251 15,181 24,960 10,232 16,099

Redemptions Hybrid and Money bond market $1,465 $2,587 1,920 4,407 2,348 4,921 3,410 6,517 6,830 9,161 7,234 11,849 8,041 16,191 9,905 22,063 14,964 30,153 22,275 51,750 27,483 93,561 27,510 107,189 38,908 110,942 46,632 70,832 44,382 47,552 44,472 37,578 44,350 32,859 55,877 45,488 90,601 72,144 69,691 78,231 108,772 42,401 126,284 36,910 126,100 33,824 113,897 34,867 104,218 31,043 111,461 31,089

Regular4 Equity $357 301 581 467 3,786 4,840 7,182 12,871 20,542 21,853 21,267 17,921 18,574 13,319 14,543 11,666 12,376 20,444 12,564 14,382 8,517 9,840 12,616 16,922 6,335 6,998

Hybrid and bond $203 124 273 227 742 606 815 1,417 3,403 3,174 2,288 3,346 5,281 6,774 5,325 2,702 3,412 3,413 3,546 1,999 4,959 4,616 1,271 6,661 758 5,999

Exchange5 Money market $440 352 596 390 2,501 3,223 4,729 9,298 11,254 14,856 12,017 9,356 9,570 8,351 6,472 5,104 6,555 7,693 5,706 6,397 4,102 1,795 1,293 1,377 3,139 3,102

new cash flow is the dollar value of new sales minus redemptions combined with net exchanges. 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 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.

2 New

1 Net

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

New2

Millions of dollars, annual

Variable Annuity Mutual Funds: Components of Net New Cash Flow1

TABLE 59

DATA SECTION 5

TABLE 60

Total Net Assets of Mutual Funds Held in Individual and Institutional Accounts Millions of dollars, year-end

Total

Equity

Hybrid

Bond

Money market

$6,974,913 6,383,157 7,402,118 8,095,801 8,891,375 10,398,155 12,000,168 9,620,637 11,112,623 11,833,363 11,632,348 13,056,677 15,050,820 15,875,269 15,651,956

$3,392,399 2,642,420 3,653,370 4,342,577 4,885,444 5,832,582 6,413,222 3,655,162 4,872,541 5,596,629 5,212,989 5,938,747 7,762,721 8,314,321 8,148,257

$358,027 335,276 447,570 552,250 621,479 731,503 821,522 562,262 717,580 842,198 883,981 1,034,058 1,285,009 1,376,586 1,336,584

$939,177 1,140,387 1,261,157 1,299,274 1,357,630 1,495,619 1,679,664 1,570,978 2,206,609 2,591,022 2,844,428 3,390,704 3,285,282 3,459,721 3,412,371

$2,285,310 2,265,075 2,040,022 1,901,700 2,026,822 2,338,451 3,085,760 3,832,236 3,315,893 2,803,514 2,690,950 2,693,169 2,717,808 2,724,641 2,754,743

Individual accounts 2001 $6,102,362 2002 5,520,759 2003 6,554,272 2004 7,204,277 2005 7,803,136 2006 9,098,620 2007 10,393,003 2008 7,866,675 2009 9,294,472 2010 10,062,948 2011 9,937,877 2012 11,246,870 2013 13,070,425 2014 13,774,752 2015 13,544,493

$3,215,167 2,491,013 3,463,587 4,093,544 4,576,624 5,437,579 5,986,591 3,405,824 4,503,074 5,131,396 4,779,201 5,449,358 7,158,276 7,663,633 7,499,413

$347,782 325,811 435,131 536,248 600,437 704,116 792,386 544,230 693,742 808,656 845,148 991,861 1,227,376 1,316,730 1,279,971

$855,593 1,046,924 1,168,216 1,205,962 1,235,488 1,358,138 1,521,986 1,425,757 2,009,477 2,339,321 2,579,414 3,067,822 2,956,424 3,107,233 3,057,993

$1,683,820 1,657,012 1,487,338 1,368,522 1,390,586 1,598,787 2,092,040 2,490,863 2,088,180 1,783,575 1,734,114 1,737,830 1,728,349 1,687,156 1,707,116

Institutional accounts* 2001 $872,551 2002 862,398 2003 847,846 2004 891,524 2005 1,088,239 2006 1,299,535 2007 1,607,166 2008 1,753,962 2009 1,818,151 2010 1,770,416 2011 1,694,471 2012 1,809,807 2013 1,980,396 2014 2,100,517 2015 2,107,463

$177,232 151,407 189,783 249,033 308,820 395,003 426,630 249,337 369,467 465,233 433,788 489,389 604,445 650,688 648,844

$10,245 9,465 12,439 16,002 21,042 27,386 29,136 18,031 23,839 33,542 38,832 42,196 57,633 59,856 56,614

$83,584 93,463 92,941 93,312 122,143 137,481 157,678 145,220 197,132 251,701 265,014 322,882 328,858 352,488 354,378

$601,490 608,064 552,684 533,178 636,235 739,664 993,721 1,341,374 1,227,714 1,019,939 956,837 955,339 989,460 1,037,485 1,047,627

DATA SECTION 6

Year Total 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

* 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. 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 MUTUAL FUNDS

231

TABLE 61

Total Net Assets of Institutional Investors in Mutual Funds by Type of Institution and Type of Fund Millions of dollars, year-end

Year 2006

2007

2008

2009

2010

2011

DATA SECTION 6

2012

2013

2014

2015

Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market Total Equity Hybrid Bond Money market

Total $1,299,535 395,003 27,386 137,481 739,664 1,607,166 426,630 29,136 157,678 993,721 1,753,962 249,337 18,031 145,220 1,341,374 1,818,151 369,467 23,839 197,132 1,227,714 1,770,416 465,233 33,542 251,701 1,019,939 1,694,471 433,788 38,832 265,014 956,837 1,809,807 489,389 42,196 322,882 955,339 1,980,396 604,445 57,633 328,858 989,460 2,100,517 650,688 59,856 352,488 1,037,485 2,107,463 648,844 56,614 354,378 1,047,627

Business corporations $605,919 135,407 7,856 34,654 428,003 749,128 136,905 8,306 38,276 565,641 904,784 70,729 5,702 29,355 798,998 886,559 106,237 7,989 47,265 725,069 741,637 121,372 10,953 54,171 555,140 681,851 102,158 12,042 51,822 515,830 684,202 108,787 11,218 59,285 504,912 747,036 136,382 15,300 59,023 536,331 792,761 150,258 15,659 68,618 558,226 812,540 149,621 15,716 70,382 576,821

Financial institutions1 $392,457 117,135 8,295 26,783 240,243 474,903 119,384 10,216 30,836 314,466 497,079 64,981 5,708 28,624 397,766 510,826 89,282 7,126 41,527 372,893 515,472 108,385 10,186 54,853 342,048 488,005 95,036 11,390 57,910 323,670 514,673 97,985 13,941 68,645 334,102 544,128 119,939 17,246 70,253 336,690 572,587 122,681 18,060 78,590 353,255 569,853 124,215 19,077 85,393 341,168

Nonprofit organizations $125,403 55,242 4,848 25,411 39,902 150,177 60,760 4,500 24,435 60,482 135,541 33,136 2,717 22,868 76,820 147,414 44,777 3,665 29,010 69,963 153,371 49,083 4,262 33,453 66,574 146,375 45,315 4,795 36,207 60,058 152,281 51,715 5,186 40,305 55,074 168,929 63,309 7,420 36,578 61,622 185,064 64,945 7,682 40,105 72,332 188,405 62,350 8,172 39,450 78,433

Other2 $175,755 87,219 6,388 50,633 31,515 232,957 109,580 6,114 64,131 53,132 216,558 80,492 3,904 64,373 67,789 273,352 129,171 5,060 79,331 59,790 359,936 186,394 8,142 109,224 56,177 378,239 191,280 10,606 119,075 57,278 458,651 230,902 11,851 154,647 61,251 520,303 284,815 17,667 163,004 54,816 550,105 312,804 18,454 165,174 53,672 536,665 312,658 13,649 159,153 51,205

1 Financial

institutions include credit unions, 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. 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.

232

2016 INVESTMENT COMPANY FACT BOOK

TABLE 62

Total Net Assets of Institutional Investors in Taxable Money Market Funds by Type of Institution and Type of Fund1 Millions of dollars, year-end

Year 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2013

2014

2015

Business corporations $300,471 234,934 65,536 303,148 246,880 56,267 270,469 220,562 49,907 277,235 228,594 48,641 322,944 270,892 52,052 388,596 324,089 64,507 514,367 444,130 70,237 736,036 659,901 76,134 668,516 606,631 61,885 513,038 459,580 53,458 481,122 428,498 52,624 468,745 422,858 45,887 501,228 453,682 47,547 523,649 477,550 46,099 543,165 500,001 43,164

Financial institutions 2 $219,136 195,663 23,473 226,645 202,475 24,170 194,259 173,539 20,720 161,810 146,520 15,290 197,002 172,215 24,788 221,779 208,179 13,600 294,432 273,626 20,806 377,963 350,945 27,018 356,992 336,161 20,831 328,890 307,202 21,688 314,508 292,478 22,031 324,330 305,032 19,299 328,943 314,440 14,503 346,684 332,962 13,722 334,344 321,937 12,407

Nonprofit organizations $27,975 18,193 9,783 27,673 20,186 7,487 32,223 22,473 9,751 28,909 18,934 9,975 32,896 23,666 9,229 37,856 26,698 11,158 57,470 43,408 14,062 74,803 60,632 14,171 68,124 57,764 10,360 65,252 56,440 8,812 58,686 50,996 7,689 53,961 47,365 6,596 60,660 55,175 5,485 70,818 65,085 5,734 77,244 70,426 6,818

Other3 $27,599 19,687 7,912 20,646 15,219 5,427 18,202 11,870 6,333 18,659 12,586 6,073 25,696 18,266 7,430 29,379 22,613 6,766 50,232 43,254 6,977 64,900 58,282 6,618 57,025 52,029 4,996 53,865 49,365 4,500 55,680 50,864 4,815 60,686 56,492 4,194 54,320 50,300 4,020 53,051 49,348 3,703 50,524 46,470 4,054

DATA SECTION 6

2012

Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds Total Institutional funds Retail funds

Total $575,181 468,478 106,704 578,112 484,760 93,352 515,153 428,443 86,710 486,612 406,634 79,979 578,538 485,039 93,499 677,610 581,580 96,030 916,501 804,418 112,082 1,253,701 1,129,759 123,941 1,150,656 1,052,584 98,072 961,045 872,587 88,458 909,996 822,836 87,160 907,723 831,747 75,976 945,152 873,597 71,555 994,202 924,944 69,258 1,005,277 938,834 66,443

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. 2 Financial institutions include credit unions, 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. 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 MUTUAL FUNDS

233

234

2016 INVESTMENT COMPANY FACTBOOK

Total $775 994 1,294 1,285 1,227 1,102 1,422 1,656 1,879 2,222 2,492 1,710 2,196 2,509 2,473 2,847 3,474 3,702 3,630

Domestic $527 688 914 885 789 631 866 1,016 1,104 1,246 1,297 755 982 1,129 1,069 1,208 1,616 1,756 1,688

World $56 67 109 115 96 85 124 172 229 334 422 223 324 372 324 380 481 496 503

Equity funds

Year-end

Hybrid funds $73 91 102 109 118 115 154 195 255 326 403 309 429 520 554 664 808 873 887

Total net assets Bond funds $58 72 77 80 104 139 155 164 179 192 217 225 291 341 373 440 419 437 411

Money market funds $60 76 92 96 119 132 122 110 112 124 152 198 170 146 154 154 150 140 141 Total $67 77 70 85 91 77 50 71 96 91 94 37 40 31 17 35 56 18 -44

Domestic $45 44 45 68 39 26 37 40 12 -5 -29 -38 -11 -12 -40 -38 13 -17 -66

World $11 4 8 22 2 6 7 21 27 47 35 -14 13 7 -2 -3 27 25 22

Equity funds

Annual

Hybrid funds $7 6 2 -1 12 7 13 22 46 36 52 32 32 34 36 39 36 17 23

Estimated net new cash flow

(*) = between -$500 million and $500 million Note: Data for funds that invest primarily in other mutual funds are included in the series. Components may not add to the total because of rounding.

Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billions of dollars

Mutual Fund DC Plan Assets and Estimated Net New Cash Flow by Type of Fund

TABLE 63

DATA SECTION 7

Bond funds $6 11 5 -3 19 26 4 2 10 6 13 17 35 28 15 37 -15 2 -23

Money market funds -$3 11 11 -1 18 12 -11 -14 (*) 8 22 40 -29 -26 8 (*) -5 -10 (*)

Total $787 999 1,277 1,265 1,205 1,090 1,389 1,598 1,782 2,144 2,438 1,697 2,121 2,427 2,418 2,763 3,334 3,533 3,499

Domestic $442 586 797 781 699 548 748 860 932 1,067 1,125 654 834 949 895 1,011 1,359 1,481 1,460

World $79 93 137 136 111 93 131 176 231 324 410 221 309 371 316 358 449 461 465

Equity funds

Year-end

Hybrid funds $84 98 102 104 110 110 162 218 264 340 409 288 372 444 495 583 716 788 783

Total net assets Bond funds $92 107 110 109 133 175 196 205 211 234 270 261 376 459 499 594 579 585 576

Money market funds $90 114 132 136 153 164 152 138 144 179 224 273 229 204 213 218 230 219 216 Total $67 90 67 62 69 55 50 59 64 110 124 (*) 24 41 26 38 90 17 3

Domestic $54 50 54 68 34 3 30 19 3 5 -14 -43 -18 -18 -38 -33 23 -11 -18

World $7 6 2 14 -2 (*) 4 20 24 36 33 -15 3 11 -11 -14 25 16 16

Equity funds

Annual

Hybrid funds $5 3 -1 -9 8 10 24 37 34 31 45 1 13 26 45 28 44 35 8

Estimated net new cash flow

(*) = between -$500 million and $500 million Note: Data for funds that invest primarily in other mutual funds are included in the series. Components may not add to the total because of rounding.

Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billions of dollars

Bond funds $7 12 1 -7 19 34 7 -1 2 11 24 16 69 47 21 53 -14 -13 (*)

Mutual Fund IRA Assets and Estimated Net New Cash Flow by Type of Fund

TABLE 64

DATA SECTION 7

RETIREMENT ACCOUNT INVESTING IN MUTUAL FUNDS

235

Money market funds -$6 19 11 -4 10 9 -14 -15 1 27 36 41 -45 -26 9 5 12 -10 -3

TABLE 65

Worldwide Total Net Assets of Regulated Open-End Funds Millions of U.S. dollars, year-end

2008 World

2009

2010

2011

2012

2013

2014

$20,631,003 $25,088,939 $27,374,359 $26,578,593 $30,213,561 $34,462,543 $37,072,351 $37,190,528

Americas 11,130,264 13,355,373 14,591,545 14,583,246 16,488,566 18,864,164 20,009,504 Argentina 3,867 4,470 5,179 6,808 9,185 11,179 15,630 Brazil 479,321 783,970 980,448 1,008,928 1,070,998 1,018,641 989,542 Canada 416,031 565,156 636,947 753,606 856,504 940,580 981,804 Chile 17,587 34,227 38,243 33,425 37,900 39,291 44,166 Costa Rica 1,098 1,309 1,470 1,266 1,484 1,933 2,092 Mexico 60,435 70,659 98,094 92,743 112,201 120,518 119,504 Trinidad and Tobago N/A 5,832 5,812 5,989 6,505 6,586 7,121 United States 10,151,925 11,889,750 12,825,352 12,680,481 14,393,789 16,725,436 17,849,645 Europe Austria Belgium Bulgaria Croatia Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Liechtenstein Luxembourg Malta Netherlands Norway

2015

7,393,787 155,555 105,057 226 N/A 5,260 65,182 48,750 1,591,082 1,130,972 12,189 10,234 720,486 288,354 20,489 2,042,317 N/A 77,379 41,157

8,912,070 176,008 106,721 256 N/A 5,436 83,024 66,131 1,805,641 1,342,275 12,434 13,127 860,515 297,839 30,329 2,538,921 N/A 95,512 71,170

9,573,876 173,908 96,288 302 N/A 5,508 89,800 71,210 1,617,176 1,389,306 8,627 14,672 1,242,321 248,838 38,981 2,799,021 N/A 85,924 84,505

8,949,093 157,510 81,505 291 N/A 4,445 84,891 62,193 1,382,068 1,356,446 5,213 8,417 1,324,482 191,479 36,412 2,587,137 2,132 69,156 79,999

19,557,328 16,435 743,530 889,610 39,898 2,533 105,940 6,983 17,752,399

10,257,646 11,715,462 12,858,573 12,772,328 172,950 181,694 165,084 151,199 81,651 91,528 100,790 92,115 324 504 496 440 N/A N/A 2,058 1,975 5,001 5,131 5,746 7,812 103,506 118,702 120,844 116,696 73,985 88,462 86,397 88,351 1,473,085 1,531,500 1,940,490 1,832,073 1,587,390 1,824,429 1,847,268 1,799,754 6,011 6,742 5,256 4,292 9,494 12,870 15,980 14,825 1,581,361 1,811,933 2,020,134 2,067,251 189,937 223,403 217,363 207,867 36,585 40,940 45,792 44,938 3,007,396 3,453,394 3,518,566 3,565,757 3,033 3,160 4,423 3,808 76,145 85,304 74,922 N/A 98,723 109,325 112,223 102,526

DATA SECTION 8

Continued on the next page

236

2016 INVESTMENT COMPANY FACT BOOK

TABLE 65 CONTINUED

Worldwide Total Net Assets of Regulated Open-End Funds Millions of U.S. dollars, year-end

Poland Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland Turkey United Kingdom Asia and Pacific Australia China India Japan Korea, Rep. of New Zealand Pakistan Philippines Taiwan Africa South Africa

2008

2009

2010

2011

2012

2013

2014

2015

17,782 13,572 326 2,026 3,873 2,067 270,983 113,331 135,052 15,404 504,681

23,025 15,808 1,134 3,182 4,257 2,610 269,611 170,277 168,260 19,426 729,141

25,595 11,004 1,713 3,917 4,381 2,663 216,915 205,449 261,893 19,545 854,413

18,463 7,321 2,388 3,072 3,222 2,279 195,220 179,707 273,061 14,048 816,537

25,883 7,509 2,613 N/A 2,997 2,370 191,284 205,733 310,686 16,478 985,517

27,858 9,625 4,000 N/A 3,347 2,506 248,234 252,878 397,080 14,078 1,166,834

34,177 15,786 4,932 N/A 6,514 2,550 274,072 283,683 436,431 15,288 1,501,308

32,286 21,628 5,038 N/A 6,202 2,448 274,715 279,977 457,162 12,833 1,578,360

2,037,535 841,133 276,303 62,805 575,327 221,991 10,612 1,985 1,263 46,116

2,715,235 1,198,838 381,207 130,284 660,666 264,574 17,657 2,224 1,488 58,297

3,067,323 1,455,850 364,985 111,421 785,504 266,495 19,562 2,290 2,184 59,032

2,921,278 1,440,128 339,038 87,519 745,383 226,717 23,709 2,984 2,363 53,437

3,322,199 1,667,128 437,449 114,489 738,488 267,583 31,145 3,159 3,566 59,192

3,740,049 1,624,081 460,332 107,895 1,157,972 285,172 34,185 3,464 4,662 62,286

4,057,800 1,601,078 708,884 136,834 1,171,974 330,168 41,559 4,156 5,098 58,049

4,738,804 1,521,313 1,263,130 168,186 1,328,634 343,293 41,908 4,164 5,029 63,147

69,417 69,417

106,261 106,261

141,615 141,615

124,976 124,976

145,150 145,150

142,868 142,868

146,474 146,474

122,068 122,068

N/A = not available Note: Components may not add to the total because of rounding. Regulated open-end funds include mutual funds, exchange-traded funds (ETFs), and institutional funds. New Zealand and Trinidad and Tobago include home-and-foreign domiciled funds. Croatia, France, Ireland, Netherlands, Norway, and Slovakia include funds of funds. Prior to 2014, Finland, Germany, Italy, Luxembourg, Romania, Spain, and Switzerland include funds of funds. After 2013, Japan includes funds of funds. Prior to 2014, ETFs and other non-UCITS are not included in European data. Prior to 2013, institutional funds are not included in data for Japan. Source: International Investment Funds Association

DATA SECTION 8

WORLDWIDE REGULATED OPEN-END FUNDS

237

TABLE 66

Worldwide Number of Regulated Open-End Funds Year-end

2008

2009

2010

2011

2012

2013

2014

2015

World

76,519

75,293

77,836

81,429

82,410

88,747

98,832

100,494

Americas Argentina Brazil Canada Chile Costa Rica Mexico Trinidad and Tobago United States

17,205 253 4,169 2,015 1,484 85 431 N/A 8,768

17,732 252 4,744 2,075 1,691 64 407 36 8,463

18,916 254 5,618 2,117 1,912 68 434 35 8,478

20,884 281 6,513 2,655 2,150 63 464 36 8,722

22,291 291 7,468 2,866 2,286 66 488 42 8,784

23,322 297 8,072 2,963 2,385 66 487 43 9,009

24,378 302 8,560 3,164 2,418 66 486 43 9,339

25,230 346 8,783 3,283 2,500 65 499 44 9,710

Europe Austria Belgium Bulgaria Croatia Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Liechtenstein Luxembourg Malta Netherlands Norway Poland

43,521 1,765 1,828 81 N/A 76 489 389 8,301 5,633 239 302 3,097 977 335 11,166 N/A 458 a 530 210

41,862 1,717 1,845 85 N/A 78 483 377 7,982 5,967 210 301 2,721 880 348 11,136 N/A N/A 487 208

42,712 1,762 1,797 90 N/A 80 490 366 7,791 5,923 213 325 2,899 823 536 11,860 N/A N/A 507 214

43,400 1,760 1,723 92 N/A 80 500 368 7,744 5,813 196 200 3,085 822 596 12,258 59 495 507 226

42,449 1,776 1,529 95 N/A 80 495 375 7,392 5,868 177 214 3,167 733 717 12,458 54 497 406 259

43,092 1,805 1,432 98 N/A 85 510 369 7,154 5,905 166 216 3,345 777 875 12,760 69 501 573 264

49,335 1,629 1,231 104 82 108 526 383 11,273 5,509 143 307 5,833 687 946 11,838 110 561 619 398

47,427 1,596 1,164 104 85 128 556 371 11,122 5,604 139 316 3,864 713 1,184 12,074 130 N/A 700 391

DATA SECTION 8

Continued on the next page

238

2016 INVESTMENT COMPANY FACT BOOK

TABLE 66 CONTINUED

Worldwide Number of Regulated Open-End Funds Year-end

Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland Turkey United Kingdom Asia and Pacific Australia China India Japan Korea, Rep. of New Zealand Pakistan Philippines Taiwan Africa South Africa

2008

2009

2010

2011

2012

2013

2014

2015

184 52 528 57 125 2,944 508 572 304 2,371

171 51 480 55 125 2,588 506 509 286 2,266

171 56 462 59 130 2,486 504 653 311 2,204

173 105 472 65 137 2,474 508 664 337 1,941

157 62 N/A 62 131 2,349 456 667 351 1,922

153 64 N/A 58 114 2,267 484 765 373 1,910

184 72 N/A 87 110 2,235 522 843 398 2,597

396 74 N/A 88 109 2,238 471 860 377 2,573

14,909 N/A 429 551 3,333 9,384 643 83 43 443

14,795 N/A 547 590 3,656 8,703 702 96 41 460

15,265 N/A 660 658 3,905 8,687 700 125 43 487

16,198 N/A 831 680 4,196 9,064 709 137 47 534

16,703 N/A 1,065 692 4,384 9,121 700 139 48 554

21,271 N/A 1,415 699 7,818 9,876 694 152 47 570

23,948 N/A 1,763 768 8,761 11,235 632 159 53 577

26,510 N/A 2,558 804 9,804 11,918 609 160 55 602

884 884

904 904

943 943

947 947

967 967

1,062 1,062

1,171 1,171

1,327 1,327

Year-end data are not available. Data are as of September. N/A = not available Note: Regulated open-end funds include mutual funds, exchange-traded funds (ETFs), and institutional funds. New Zealand and Trinidad and Tobago include home-and-foreign domiciled funds. Croatia, France, Ireland, Netherlands, Norway, and Slovakia include funds of funds. Prior to 2014, Finland, Germany, Italy, Luxembourg, Romania, Spain, and Switzerland include funds of funds. After 2013, Japan includes funds of funds. Prior to 2014, ETFs and other non-UCITS are not included in European data. Prior to 2013, institutional funds are not included in data for Japan. Source: International Investment Funds Association

a

DATA SECTION 8

WORLDWIDE REGULATED OPEN-END FUNDS

239

TABLE 67

Worldwide Net Sales of Regulated Open-End Funds Millions of U.S. dollars, annual

World

2008

2009

2010

2011

$540,820

$483,428

$505,846

$345,087

797,670 N/A -32,653 17,495 -1,167 N/A -3,418 N/A 817,413

199,478 N/A 47,317 12,074 9,921 N/A 8,572 -150 121,744

94,270 N/A 58,316 23,797 415 N/A 18,382 -45 -6,766

288,701 N/A 49,995 37,032 -423 432 4,005 107 197,553

690,170 N/A 56,099 50,697 813 -221 6,869 292 575,621

658,620 N/A 34,713 64,965 5,394 -305 7,705 -13 546,161

676,043 4,511 b 1,886 90,035 8,550 341 10,442 292 559,986

453,487 4,421 13,531 82,238 983 427 -1,226 -23 353,136

-369,399 -19,238 N/A -151 N/A -1,561 -4,000 -11,387 -68,351 -1,601 -11,382 -688 N/A -108,494 3,206 -59,829 N/A -6,117a 40 -1,423

258,538 1,348 N/A 8 N/A -263 2,419 5,475 6,164 58,262 -1,124 1,256 N/A -11,437 5,698 133,944 N/A N/A 6,689 859

399,705 2,967 N/A 51 N/A 55 5,204 936 -110,856 99,321 -1,424 1,882 161,063 -30,507 400 215,576 N/A 225 4,807 1,278

282 -5,081 N/A 8 N/A -536 2,537 -1,709 -125,565 55,803 -1,489 -2,534 106,830 -41,845 762 8,144 -53 -9,532 4,380 -1,764

382,316 -138 N/A 16 N/A 161 8,038 3,223 -30,528 94,210 -330 -491 116,203 -14,247 2,981 159,652 599 -1,017 7,048 3,931

486,502 -910 N/A 129 N/A 256 7,439 5,617 -99,007 110,189 -741 3,548 103,063 16,796 -215 256,895 -295 875 4,727 2,610

800,826 4,688 N/A 36 -52 712 8,137 10,933 -26,455 120,364 -303 1,297 155,231 38,415 8,364 329,398 122 -5,261 17,184 3,167

712,170 3,198 N/A (*) 249 1,426 6,951 7,888 24,178 149,783 -444 226 127,605 11,339 993 300,428 -267 -440 c 1,733 465

Americas Argentina Brazil Canada Chile Costa Rica Mexico Trinidad and Tobago United States Europe Austria Belgium Bulgaria Croatia Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Liechtenstein Luxembourg Malta Netherlands Norway Poland

2012

2013

$1,223,059 $1,292,283

2014 $1,794,520

2015 $1,950,142

DATA SECTION 8

Continued on the next page

240

2016 INVESTMENT COMPANY FACT BOOK

TABLE 67 CONTINUED

Worldwide Net Sales of Regulated Open-End Funds Millions of U.S. dollars, annual

Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland Turkey United Kingdom Asia and Pacific Australia China India Japan Korea, Rep. of New Zealand Pakistan Philippines Taiwan Africa South Africa

2008

2009

2010

2011

2012

2013

2014

2015

-11,169 125 N/A -897 -433 -84,149 3,754 17,851 N/A -3,506

1,120 760 N/A 80 27 -15,858 10,203 7,343 2,324 43,241

-3,684 561 N/A 308 21 -30,938 7,371 4,063 2,608 68,417

-2,858 351 N/A -1,040 -103 -11,803 5,843 9,067 -1,228 13,696

-538 432 N/A -442 -140 -13,580 652 15,887 166 30,567

1,354 1,075 N/A 157 -54 30,744 8,708 5,780 969 26,794

-221 1,288 N/A 855 52 47,704 15,714 30,075 -641 40,023

-94 378 N/A 419 86 26,866 8,136 31,736 -202 9,534

105,562 N/A 35,721 b 2,754 5,430 58,819 226 -612 -453 3,677

13,908 N/A -35,612 43,029 32,571 -27,836 1,363 -3 11 385

-3,091 N/A -15,115 -35,950 68,847 -19,603 1,281 -208 318 -2,661

49,475 N/A 27,179 532 33,028 -15,605 1,784 769 536 1,252

136,777 N/A 90,505 15,832 21,526 6,822 2,468 10 629 -1,015

127,092 N/A -3,842 2,724 129,992 -4,876 231 -89 1,480 1,472

307,629 N/A 167,834 7,895 97,243 34,917 3,551 28 -4 -3,835

776,596 N/A 470,457 33,195 233,405 29,190 2,966 -68 327 7,124

11,504 11,504

14,962 14,962

6,629 6,629

13,796 13,796

20,069 20,069

10,022 10,022

7,889 7,889

6,987 6,987

(*) = between -$0.5 million and $0.5 million a Year-end data are not available. Data are for January through September. b Data are only for October through December. c Data are only for January through June. N/A = not available Note: Net sales is a calculation of total sales minus total redemptions plus net exchanges. Components may not add to the total because of rounding. Regulated open-end funds include mutual funds, exchange-traded funds (ETFs), and institutional funds. New Zealand and Trinidad and Tobago include home-and-foreign domiciled funds. Croatia, France, Ireland, Netherlands, Norway, and Slovakia include funds of funds. Prior to 2014, Finland, Germany, Italy, Luxembourg, Romania, Spain, and Switzerland include funds of funds. After 2013, Japan includes funds of funds. Prior to 2014, ETFs and other non-UCITS are not included in European data. Prior to 2013, institutional funds are not included in data for Japan. Source: International Investment Funds Association

DATA SECTION 8

WORLDWIDE REGULATED OPEN-END FUNDS

241

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.. ................................................................................................................... 242 The Types of U.S. Investment Companies. . ................................................................................................... 244 The Organization of a Mutual Fund............................................................................................................... 245 Tax Features of Mutual Funds.. ....................................................................................................................... 250 Core Principles Underlying the Regulation of U.S. Investment Companies. . ........................................... 256

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 to 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.

242

APPENDIX A

The first mutual, or open-end, fund was introduced in Boston in March 1924. The Massachusetts Investors 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 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 registration and disclosure requirements and restrictions on day-to-day operations. The Investment Company Act requires the registration of all investment companies with more than 100 investors. Among other things, the 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. In 1938, the Securities Exchange Act of 1934 was revised to add Section 15A, which authorized the SEC to create selfregulatory organizations. Pursuant to this authority, in 1939 a self-regulatory organization for broker-dealers—which is now known as the Financial Industry Regulatory Authority (FINRA)— was created. Through its rules, inspections, and enforcement activities, FINRA, with oversight by the SEC, continues to regulate the conduct of broker-dealers, thereby adding another layer of protection for investors.

The Securities Act of 1933

Requires the registration of public offerings of securities, including investment company shares, and regulates such offerings. 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 243

The Types of U.S. Investment Companies Fund sponsors in the United States 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 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 next computed 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. Money market funds are one type of mutual fund that offer investors a variety of features, including liquidity, a market-based rate of return, and the goal of returning principal, all at a reasonable cost. These funds, which are typically publicly offered to all types of investors, are registered investment companies that are regulated by the Securities and Exchange Commission (SEC) under U.S. federal securities laws, including Rule 2a-7 under the Investment Company Act. That rule contains numerous risk-limiting conditions concerning portfolio maturity, quality, diversification, and liquidity intended to help a fund achieve its objectives. In 2014, the SEC adopted amendments to Rule 2a-7 that will require institutional prime (funds that primarily invest in corporate debt securities) and institutional municipal money market funds to maintain a floating NAV for transactions based on the current market value of the securities in their portfolios; funds must comply with this requirement by October 2016. Government money market funds and retail money market funds (funds designed to limit all beneficial owners of the funds to natural persons) will be allowed to continue using the amortized cost or penny rounding method of pricing or both to seek to maintain a stable share price. The 2014 amendments also give money market fund boards of directors the ability to impose liquidity fees or to suspend redemptions temporarily if a fund’s level of weekly liquid assets falls below a certain threshold.

244

APPENDIX A

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 76. 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 56. 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 it buys and holds a set of particular investments until a set termination date, at which time the trust is dissolved and proceeds are paid to shareholders. For more information on UITs, see page 20.

The Organization of a Mutual Fund A mutual fund typically is organized under state law either as a corporation or a business trust (sometimes called a statutory trust). The three most popular forms of organization are Massachusetts business trusts, Maryland corporations, and Delaware statutory trusts (Figure A.1).1 Historically, Massachusetts business trusts were the most popular—in part because the very first mutual fund was formed as a Massachusetts business trust. This was a common form of organization at the time for pools that invested in real estate or public utilities and it provided a model for others to follow. Over the last few decades, the percentage of funds organized as Massachusetts business trusts has declined as more and more funds have formed as Maryland corporations, as well as Delaware statutory trusts, the most favored form of mutual fund organization.

1

Fewer than 1,000 funds, or about 9 percent, have chosen other forms of organization, such as limited liability partnerships, or other domiciles, such as Ohio or Minnesota.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 245

Developments in the late 1980s gave asset management companies these other attractive choices. For example, in 1987, Maryland revised its law to align it with interpretations of the Investment Company Act of 1940 concerning when funds are required to hold annual meetings. As a result, Maryland corporations became more competitive with the Massachusetts business trust as a form of organization for mutual funds. In 1988, Delaware— already a popular domicile for U.S. corporations—adopted new statutory provisions devoted specifically to business trusts (since renamed statutory trusts). Benefits, such as management of the trust and limited liability afforded to the trust’s beneficial owners, have led to its current dominance over other forms of mutual fund organization. Mutual funds have officers and directors (if the fund is a corporation) or trustees (if the fund is a business trust).2 The fund’s board plays an important role in overseeing fund operations, described in more detail on page 260. FIGURE A.1

The Most Popular Forms of Mutual Fund Organization Percentage of funds, year-end 2015

9% Other 16% Maryland corporations

35% Massachusetts business trusts

40% Delaware statutory trusts Number of funds: 10,530 Note: Data include mutual funds that do not report statistical information to the Investment Company Institute and mutual funds that invest primarily in other mutual funds.

2

For ease of reference, this appendix refers to all directors and trustees as directors and all boards as boards of directors.

246

APPENDIX A

Unlike other companies, 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—either affiliated organizations or independent contractors—to invest fund assets and carry out other business activities. Figure A.2 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 written compliance policies and procedures that govern the operations of the fund and the fund’s administrator, investment adviser, transfer agent, and principal underwriter and that are reasonably designed to ensure the fund’s compliance with the federal securities laws. All funds must also have a chief compliance officer (CCO), whose appointment must be approved by the fund’s board and who must annually produce a report for the board regarding the adequacy of the fund’s compliance policies and procedures, the effectiveness of their implementation, and any material compliance matters that have arisen. FIGURE A.2

Organization of a Mutual Fund Shareholders

Sponsor/ Investment adviser

Independent public accountant

Administrator

Board of directors

Principal underwriter

Fund

Custodian

Transfer agent

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 247

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 and 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, 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 1933.3 Unless otherwise exempt from doing so, the fund also must 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 fund’s shareholders and determine which securities to buy and sell in the fund’s portfolio, consistent with the fund’s 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.

3

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.

248

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 a mutual fund, investment advisers are required to have their own written compliance programs that are overseen by CCOs and to 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, and bookkeeping and internal auditing; they also may 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 through a fund’s transfer agent or indirectly through a broker-dealer that is authorized to sell fund shares. In order to offer a particular fund’s shares, however, a broker-dealer must have a sales agreement with the fund. The role of a fund’s principal underwriter is to act as the agent for the fund in executing sales agreements that authorize broker-dealers to offer for sale and sell fund shares. Though principal underwriters must register under the Securities Exchange Act of 1934 as brokerdealers, they (1) do not operate as full service broker-dealers, (2) typically are not involved in offering or selling fund shares to retail investors, and (3) do not establish or maintain accounts for retail investors.

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. Additionally, they may 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 on page 261.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 249

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 that 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 eligible for the tax treatment provided by subchapter M, including the ability to deduct from its taxable income the dividends it pays to shareholders, 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 all, or nearly all, of their income and capital gains each year. 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, 98.2 percent of its net capital gains earned during the 12-month period ending on October 31 of the calendar year, and 100 percent of any previously undistributed amounts. Mutual funds typically seek to avoid this charge—imposed at a 4 percent rate on the underdistributed amount—by making the required minimum distribution each year.

250

APPENDIX A

Mutual Fund Assets by Tax Status Fund investors are responsible for paying tax on the amount of a fund’s earnings and gains distributed to them, 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 2015, 5 percent of all mutual fund assets were held in tax-exempt funds, and 53 percent were invested in tax-deferred accounts held by households. FIGURE A.3

58 Percent of Mutual Fund Assets Were Held in Tax-Deferred Accounts and Tax-Exempt Funds Percentage of assets, year-end 2015

31% Taxable household 53% Tax-deferred household 10% Taxable nonhousehold 5% Tax-exempt funds Total mutual fund assets: $15.7 trillion Note: Components do not add to 100 percent because of rounding.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 251

Types of Distributions Mutual funds make two types of taxable distributions to shareholders: ordinary dividends and capital gains. Ordinary 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 a U.S. investor’s tax return and are taxed at the investor’s ordinary income tax rate, unless they are qualified dividends. Qualified dividend income is taxed at a maximum rate of 20 percent. Some dividends paid by mutual funds may qualify for these lower top tax rates. 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. Long-term capital gains are taxed at a maximum rate of 20 percent. Certain high-income individuals also are subject to a 3.8 percent tax on net investment income (NII). The tax on NII applies to interest, dividends, and net capital gains, including those received from a mutual fund. Non-U.S. investors may be subject to U.S. withholding and estate taxes and certain U.S. tax reporting requirements on investments in U.S. funds. Amounts distributed to non-U.S. investors that are designated as interest-related dividends or dividends deriving from capital gains will generally be eligible for exemption from U.S. withholding tax. Other distributions that are treated as ordinary dividends will generally be subject to U.S. withholding tax (at a 30 percent rate or lower treaty rate). 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)

252

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. In addition, up to $3,000 of capital losses in excess of capital gains ($1,500 for a married individual filing a separate return) may be used to offset ordinary income. 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 have been providing cost basis information to shareholders or computing gains and losses for shares sold. New tax rules enacted in 2012 require all brokers and funds to provide cost basis information to shareholders, as well as to indicate whether any gains or losses are long-term or short-term, for fund shares acquired beginning in 2012.

Tax-Exempt Funds Tax-exempt bond funds distribute amounts attributable to municipal bond interest. These “exempt-interest dividends” are exempt from federal income tax and, in some cases, state and local taxes. 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 exempt-interest 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 253

Mutual Fund Ordinary Dividend Distributions Ordinary 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 $250 billion in dividends to fund shareholders in 2015. Bond and money market funds accounted for 44 percent of all dividend distributions in 2015. Fifty-six percent of all dividend distributions were paid to tax-exempt fund shareholders and tax-deferred household accounts. Another 38 percent were paid to taxable household accounts. FIGURE A.4

Dividend Distributions Billions of dollars, 2000–2015

Year

Tax-deferred household and tax-exempt funds

Taxable household

Taxable nonhousehold

2000

$74

$87

$25

2001

68

72

23

162

2002

59

43

12

114

2003

57

37

9

103

2004

65

41

10

117

Total $186

2005

84

61

21

166

2006

114

90

36

240

2007

143

118

47

309

2008

138

100

38

276

2009

109

63

15

187

2010

112

64

12

188

2011

121

74

12

208

2012

128

81

13

222

2013

123

81

14

218

2014

137

93

15

245

2015

140

94

16

250

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

254

APPENDIX A

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 $379 billion in capital gains to shareholders in 2015. Sixty-six percent of these distributions were paid to tax-deferred household accounts, and another 30 percent were paid to taxable household accounts. Equity, bond, and hybrid funds can distribute capital gains, but equity funds typically account for the bulk of these distributions. In 2015, 61 percent of stock fund share classes made a capital gains distribution, and 80 percent of these share classes distributed more than 2.0 percent of their assets as capital gains. FIGURE A.5

Capital Gains Distributions* Billions of dollars, 2000–2015

Year

Tax-deferred household

Taxable household

Taxable nonhousehold

Total

2000

$194

$119

$13

$326

2001

51

16

2

69

2002

10

5

1

16

2003

8

6

1

14

2004

30

21

4

55

2005

78

43

8

129

2006

164

79

14

257

2007

260

131

22

414

2008

97

29

7

132

2009

10

4

1

15

2010

22

18

3

43

2011

39

30

4

73

2012

58

37

5

100

2013

147

82

11

239

2014

252

130

17

400

2015

249

115

15

379

* Capital gains distributions include long-term and short-term capital gains. 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 255

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.4 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, though 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 other persons who control the fund.

4

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.

256

APPENDIX A

The prospectus, SAI, and certain other required information are contained in the fund’s registration statement, which is filed electronically with the 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.5 These funds also amend registration statements throughout the year as necessary to reflect material changes to their disclosure. 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,6 management’s discussion of financial performance, and other information current as of the date of the report. Following their first and third quarters, 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-Q, and Form N-PX 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 private-sector vendors, such as Morningstar, that are in the business of compiling publicly available information on funds in ways that might benefit investors.

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. This gives mutual funds and ETFs four months after the end of their fiscal year to amend their registration statements. 6 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. 5

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 257

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. 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 by the fund’s board. The daily pricing process is a critically important core compliance function that involves numerous staff and pricing vendors. The fair valuation process, a part of the overall pricing process, receives particular scrutiny from funds, their boards 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.7 This daily valuation process results in a NAV for the fund. The NAV is the price used for all mutual fund share transactions occurring that day—new purchases, sales (redemptions), and exchanges from one fund to another within the same fund family.8 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. 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. 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

ICI has published several papers on the mutual fund valuation process. For more information, see two white papers by ICI, the Independent Director’s Council, and ICI Mutual Insurance Company 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). ICI also has a two-volume compendium of SEC releases, staff letters, and enforcement actions related to the mutual fund valuation process, which is available at www.ici.org/pdf/pub_11_valuation_volume1.pdf and www.ici.org/pdf/pub_11_valuation_volume2.pdf. 8 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 that 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. 7

258

APPENDIX A

the fund’s receipt of their transaction order. For example, for a fund that prices its shares at 4:00 p.m.,9 orders received before 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. 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)10 or delay payments of redemption proceeds for more than seven days. At least 85 percent of a mutual fund’s portfolio must be invested in liquid securities.11 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 CCOs, both at the fund and adviser levels (see Compliance Programs on page 260). External oversight is provided by the SEC, the Financial Industry Regulatory Authority (FINRA), and external service providers, such as certified public accounting firms.

Funds must price their shares at least once every business 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. 10 From time to time, natural disasters and other emergencies occur that disrupt fund pricing, but Section 22(e) of the Investment Company Act prohibits funds from suspending redemptions unless the SEC declares an emergency or the New York Stock Exchange closes or restricts trading. The SEC has not declared an emergency in more than 20 years. During that period, the NYSE has closed and funds have suspended redemptions on several occasions, such as during Hurricane Sandy in 2012. See also page 244. 11 Money market funds are held to a stricter standard, and must limit illiquid investments to 5 percent of the portfolio. 9

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 259

Fund Boards Mutual funds, closed-end funds, and most ETFs have boards. The role of a fund’s board of directors 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 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 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.” Fund boards must maintain a particular level of independence. The Investment Company Act of 1940 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 2014, independent directors made up at least three-quarters of boards in 83 percent of fund complexes.12 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, 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 CCOs. Rules adopted in 2003 require every fund and adviser to have a CCO

12

See Overview of Fund Governance Practices, 1994–2014 for a description of the study that collects data on this and other governance practices. Available at www.idc.org/pdf/pub_15_fund_governance.pdf.

260

APPENDIX A

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. Fund underwriters and distributors also are overseen by FINRA, a self-regulatory organization. Funds affiliated with a bank may additionally be overseen by banking regulators. All funds are subject to the antifraud jurisdiction of each state in which the fund’s shares are offered for sale or sold. Auditors A fund’s 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 fairly present the fund’s financial position and results of operations. Sarbanes-Oxley Act 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.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 261

Limits on Leverage The inherent nature of a fund—a professionally managed pool of assets owned pro rata by its investors—is straightforward and easily understood by investors. The Investment Company Act of 1940 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 historically has 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 also can 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. 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.13 Mutual funds and ETFs are permitted to borrow from a bank if, immediately after 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.

13

Temporary loans cannot exceed 5 percent of the fund’s total net assets and must be repaid within 60 days.

262

APPENDIX A

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,14 nearly all funds use a bank custodian for domestic securities. Foreign securities are required to be held in the custody of international 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. The strict rules on the custody and reconciliation of fund assets are designed to prevent theft and other fraud-based losses. 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.

14

The Investment Company Act contains six separate custody rules for the possible types of 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. See Section 17(f) of the Investment Company Act of 1940 and SEC Rules 17f-1 through 17f-7 thereunder.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 263

Prohibitions on Transactions with Affiliates The Investment Company Act of 1940 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 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.”15 Although there are a number of prohibitions in the Investment Company Act relating to affiliated transactions, three are particularly noteworthy:

»» General prohibition on direct transactions between a fund and an affiliate »» General prohibition on “joint transactions,” where the fund and affiliate are acting together vis-à-vis a third party

»» Restrictions 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

15

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 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.

264

APPENDIX A

Diversification Both tax and securities law provide diversification standards for funds registered under the Investment Company Act. As discussed in detail above, to qualify as RICs under the tax laws, all mutual funds, closed-end funds, and ETFs, as well as most UITs, 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 or not they are diversified under the Act’s standards. 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 2015, for example, the median number of stocks held by U.S. equity funds was 95.16

16

This number is the median among U.S. actively managed and index equity funds, excluding sector funds.

HOW U.S.-REGISTERED INVESTMENT COMPANIES OPERATE AND THE CORE PRINCIPLES UNDERLYING THEIR REGULATION 265

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. The first mutual fund focusing on non-U.S. investments is made available to U.S. investors.

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.

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.

266

APPENDIX B

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.

1990

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, exchangelisted securities, and larger advisers. States retain their antifraud authority and responsibility for regulating non-exchange-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.

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.

SIGNIFICANT EVENTS IN FUND HISTORY

267

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 incentives for investors of all ages to save more in tax-deferred and taxable investment accounts.

2008

The SEC votes to adopt the 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 $3.9 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

The 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 RIC Modernization Act streamlines and updates technical tax rules, benefiting shareholders by making funds more efficient.

2011

In Business Roundtable et al. v. SEC, the United States Court of Appeals for the District of Columbia Circuit vacated the SEC’s proxy access rule for failing to adequately evaluate the rule’s costs and benefits. ICI Global—the first industry body exclusively advancing the perspective of global investment funds—is formed.

2014

The SEC adopted sweeping changes to the rules that govern money market funds, building upon the changes to money market fund regulation adopted by the SEC in 2010.

2015

The Federal Reserve raises its short-term policy interest rate target for the first time in more than nine years.

268

APPENDIX B

GLOSSARY You can find more information about many of these entries in the chapters and appendix of this book and on www.ici.org. actively managed fund. A fund that employs a portfolio manager or management team to manage the fund’s investments to try to outperform their benchmarks and peer group average. adviser. See 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. asset allocation. The proportion of different investment categories—such as stocks, bonds, and cash equivalents—that investors hold in their portfolios. asset class. A group of securities or investments that have similar characteristics and behave similarly in the marketplace. Three common asset classes are equities (e.g., stocks), fixed income (e.g., bonds), and cash equivalents (e.g., money market funds). assets. The securities, cash, and receivables owned by a fund. Examples of this are stocks, bonds, and other investments. auditor. An auditor certifies a fund’s financial statements, providing assurance that they are prepared in conformity with generally accepted accounting principles (GAAP) and fairly present the fund’s financial position and results of operations. authorized participant. An entity, usually an institutional investor, that submits orders to an exchange-traded fund (ETF) for the creation and redemption of ETF creation units. 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).

GLOSSARY

269

basis point. One one-hundredth of 1 percent (0.01 percent); thus, 100 basis points equals 1 percentage point. When applied to $1.00, 1 basis point is $0.0001; 100 basis points equals one cent ($0.01). Basis points are often used to simplify percentages written in decimal form. 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. benchmark. A standard against which the performance of a security or a mutual fund can be measured. For example, Barclays Capital Aggregate Bond Index is a benchmark index for many bond mutual funds. Many equity mutual funds are benchmarked to the S&P 500 index. See also index. bond. A debt security issued by a company, municipality, government, 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. The term fixed-income is often used interchangeably with bond. bond fund. A fund that invests primarily in bonds and other debt instruments. breakpoints. Designated levels above which certain discounts or fee rate reductions apply. In the mutual fund context, breakpoints relate to the sales charges investors pay if they buy fund shares through a broker or other intermediary, or to the management fee the fund pays to its investment adviser. Many funds offer sales charge (load) discounts to investors when they initially purchase fund shares if the amount invested surpasses a specified breakpoint. The amount of the discount typically increases as the amount of the investment reaches higher breakpoints. Similarly, funds may establish breakpoints requiring a reduction in the rate of the management fee the fund’s investment adviser may charge as fund assets surpass specified levels. break the dollar. A phrase used to describe when the net asset value (NAV) of a money market fund falls below its stable $1.00 NAV. This 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. broker. See broker-dealer. broker-dealer. A broker is a firm engaged in the business of effecting transactions in securities for the accounts of others, and is often paid by commission. A dealer is a firm engaged in the business of buying and selling securities for its own account. A broker-dealer is a firm that acts as both a broker and a dealer. Broker-dealers selling mutual fund shares are required to be registered with the SEC and regulated by FINRA. They typically are compensated for their services through sales charges paid by investors and other fees paid by the fund (e.g., 12b-1 fees). bull market. A period during which the majority of securities prices in a particular market (such as the stock market) rise substantially. Contrast bear market. 270

GLOSSARY

capital gain. An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price. Contrast capital loss. capital gains distributions. A distribution to mutual fund shareholders resulting from the fund’s sale of securities held in its portfolio at a profit. capital loss. A decline in the value of an investment, calculated by the difference between the net purchase price and the net sale price. Contrast capital gain. catch-up contribution. An additional contribution that individuals aged 50 or older are permitted to make to an individual retirement account (IRA) or employer-sponsored retirement savings plan in excess of the annual contribution limit. In 2015, the catch-up contribution amount was limited to $1,000 for traditional and Roth IRAs, $6,000 for 401(k) plans, and $3,000 for SIMPLE IRA 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 generally are issued by commercial banks and currently are insured by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000. CDs generally are 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 shortterm liabilities. Maturities typically range from overnight to 270 days. Commercial paper usually is 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 securities transactions. common stock. An investment that represents a share of ownership in a corporation. Also known as common shares. See also preferred stock. compounding. The cumulative effect that reinvesting an investment’s earnings can have by generating additional earnings of its own. Over time, compounding can produce significant growth in the value of an investment. contingent deferred sales load (CDSL). A fee that may be imposed by a fund on shareholders who redeem (sell back to the fund) shares during the first few years of ownership. A CDSL is disclosed to shareholders in the fund’s prospectus. Also known as a back-end load. corporate bond. A bond issued by a corporation, rather than by a government entity. The credit risk for a corporate bond is based on the ability of the issuing company to repay the bond.

GLOSSARY

271

Coverdell Education Savings Account (ESA). A tax-advantaged trust or custodial account set up to pay the qualified education expenses of a designated beneficiary. These accounts were previously referred to as education IRAs. creation unit. Financial institutions (called authorized participants) interact directly with an ETF by purchasing and redeeming ETF shares in large blocks called creation units. A creation unit generally contains between 25,000 and 200,000 ETFs shares. See also authorized participant. credit quality. A term used in portfolio management to describe the creditworthiness of an issuer of fixed-income securities and to indicate the likelihood that the issuer will be willing and able to repay its debt. credit risk. The possibility that a bond issuer may not be willing and able to pay interest or repay its debt. Also known as default risk. See also default. custodian. An organization, usually a bank, that safeguards the securities and other assets of a mutual fund. dealer. See broker-dealer. 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 in which 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 and 403(b) plan. Contrast defined benefit plan. depreciation. A decline in an investment’s value. Contrast appreciation. director. A person serving on the board of directors of a mutual fund. Mutual fund directors oversee the management and operations of a fund organized as a corporation. Directors also have significant and specific responsibilities under the federal securities laws. Among other things, 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. All directors have a fiduciary duty to represent the interests of shareholders. See also independent director and trustee.

272

GLOSSARY

distribution. (1) A fund’s payment of dividends and capital gains to shareholders, (2) a method of selling fund shares to the public, which could involve either direct sales from the fund to retail or institutional investors, or sales through intermediaries, such as broker-dealers, who interact directly with the purchaser of fund shares, or both, or (3) a term used to describe a withdrawal of funds from a retirement plan. 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. dividend. Money that a fund or company pays to its shareholders, typically from its investment income, after expenses. The amount is usually expressed on a per-share basis. A dividend is a type of distribution. 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). emerging market. Generally, economies that are in the process of growth and industrialization, for example, countries in Africa and Latin America. Though relatively undeveloped, these economies may hold significant growth potential in the future. May also be called developing markets. equity. A security or investment representing ownership in a company. By contrast, a bond represents a loan from the investor (owner of the bond) to a borrower (the issuer of the bond). The term equity is often used interchangeably with stock. equity fund. A fund that concentrates its investments in equities. Also known as a stock fund. exchange privilege. A feature of some funds that enables shareholders to transfer their investments from one fund to another within the same fund family as the investor’s needs or investment objectives change. Typically, fund companies allow exchanges several times a year for a low fee or no fee. Information relating to a specific fund’s exchange privileges can be found in the fund’s prospectus. 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 on the secondary market through a broker, just as they would the shares of any publicly traded company. Authorized participants are the only entities allowed to purchase and redeem ETF shares directly from the ETF. See also authorized participant.

GLOSSARY

273

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 measure of what it costs to operate a fund, expressed as a percentage of its assets. This ratio is disclosed in the fund’s prospectus and shareholder reports. 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 amount a fund might reasonably expect to receive upon a current sale of a security. Where the value of the security cannot be readily determined from transactions occurring on an exchange or otherwise, a fund must have a process in place to determine how to value the amount it would expect to receive upon a current sale. federal funds interest rate. The interest rate at which banks lend to each other in overnight borrowings to maintain their bank reserves at the Federal Reserve. Financial Industry Regulatory Authority (FINRA). A self-regulatory organization that was created under the Securities Exchange Act of 1934 and that is charged with regulating brokerdealers. To fulfill its responsibilities, FINRA adopts regulatory rules that broker-dealers must comply with, conducts inspections of such broker-dealers, and imposes sanctions on those broker-dealers that violate its rules. FINRA’s activities are overseen by the SEC. financial statements. The written record of the financial status of a fund or company, usually published in the annual report. The record generally includes a balance sheet, income statement, and other financial statements and disclosures. 529 plan. An investment program designed to help pay future qualified higher education expenses through a tax-advantaged account. These plans are offered by state governments and may also be offered by private consortiums. 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; and college savings plans allow individuals to contribute to an investment account to pay for a student’s qualified higher education expenses. fixed-income security. See bond. 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 taxdeferred contributions from their salaries to the plan. See also defined contribution plan.

274

GLOSSARY

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. See also defined contribution plan. front-end load. A fee imposed by some funds at the point of purchase to cover selling costs. Any front-end load imposed by a fund will be described in detail in the fund’s prospectus. fund family. A group or complex of funds, each typically with its own investment objective, that is managed and distributed by the same company. funds of funds. Mutual funds that primarily invest in shares of other mutual funds rather than investing directly in individual securities. Also, ETFs that primarily invest in shares of other ETFs rather than investing directly in individual securities. fund supermarket. A brokerage platform that provides access to funds from a wide range of fund families. government bond. A debt security issued by a government or its agencies (e.g., in the United States: savings bonds, Treasury bonds, Treasury inflation-protected securities [TIPS]). government money market fund. A money market fund that seeks to maintain a stable share price and invests at least 99.5 percent of its total assets in cash, government securities, and/or repurchase agreements collateralized by government securities or cash. government securities. Any debt obligation issued by a government or its agencies (e.g., Treasury bills issued by the United States). See also U.S. Treasury securities. 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, which can change proportionally over time or remain fixed. 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 must satisfy a number of specific and stringent requirements to be “independent.” In general, under the 1940 Act, an independent director cannot currently have, or at any time during the previous two years have had, a significant business relationship with the fund’s adviser, principal underwriter (distributor), or affiliates. An independent director also cannot own any stock of the investment adviser or certain related entities, such as parent companies or subsidiaries. See also director and trustee. independent public accountant. The entity that audits a fund’s financial statements. As part of the audit, the independent public accountant must consider the fund’s internal control over financial reporting, including controls for safeguarding the fund’s securities. The independent public accountant reports to the board’s audit committee.

GLOSSARY

275

index. A portfolio of assets that tracks the performance of a particular financial market or subset of it (e.g., stock, bond, or commodity markets) and serves as a benchmark against which to evaluate a fund’s performance. The most common index for equity funds is the S&P 500. See also benchmark. index fund. A fund designed to track the performance of a market index. The fund’s portfolio of assets is either a replicate or a representative sample of the designated market index. Often referred to as passively managed portfolios. individual retirement account (IRA). A tax-advantaged account set up by or for an individual to hold and invest funds for retirement. inflation. The overall general upward price movement of goods and services in an economy. Inflation is one of the major risks to investors over the long term because it erodes the purchasing power of their savings. 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 first public offering of stock or a closed-end fund’s first offering of its shares to the public. institutional investor. Businesses, nonprofit organizations, and other similar investors that 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. institutional money market fund. A money market fund that does not qualify as either a retail or government money market fund and does not limit all beneficial owners of the fund to natural persons. interest/interest rate. The fee charged by a lender to a borrower, usually expressed as an annual percentage of the principal. 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. Typically, third-party providers calculate and disseminate this measure every 15 to 60 seconds during securities market trading hours. investment adviser. An organization retained by an investment company to give professional advice on the fund’s investments and asset management practices. All investment advisers to registered investment companies, such as mutual funds, must be registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. 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. 276

GLOSSARY

investment objective. The goal (e.g., current income, long-term capital growth) that a fund pursues on behalf of its investors. The fund’s investment objective is disclosed to investors in the fund’s prospectus and the fund’s investments must be consistent with the stated investment objective. investment return. The gain or loss on an investment over a certain period, expressed as a percentage. Income and capital gains or losses are included in calculating the investment return. investment risk. The possibility of losing some or all of the amounts invested or not gaining value in an investment. issuer. The company, municipality, government, 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. level load. A combination of an annual 12b-1 fee (typically 1 percent) and a contingent deferred sales load fee (also often 1 percent) imposed by funds when shares are sold within the first year after purchase. See also contingent deferred sales load and 12b-1 fee. 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 (NAV) on any business day. In the securities 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. See also 12b-1 fee. long-term funds. A mutual fund industry designation for all mutual 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 price based on its current ask or bid prices. maturity. The date by which an issuer promises to repay a bond’s face value.

GLOSSARY

277

money market. The global financial market for short-term borrowing and lending where shortterm instruments such as Treasury bills (T-bills), commercial paper, and repurchase agreements are bought and sold. money market fund. A mutual fund regulated pursuant to Rule 2a-7 under the Investment Company Act of 1940 that invests in short-term, high-quality, fixed-income securities, and seeks the highest level of income consistent with preservation of capital (e.g., maintaining a stable share price). mutual fund. An investment vehicle that offers investors professional money management and diversified investment opportunities. All mutual funds are investment companies that are registered with the SEC under the Investment Company Act of 1940. Mutual funds buy a portfolio of securities selected by the fund’s investment adviser to meet a specified investment objective. One hallmark of mutual funds is that they are considered a liquid investment because they issue redeemable securities, meaning that the fund stands ready to buy back its shares at their next computed net asset value (NAV). 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 on each day the financial markets are open. net new cash flow. The net amount of “new” money flowing into a mutual fund. The amount is determined by calculating the dollar value of new sales of the fund 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 charge and without a 12b-1 fee of more than 0.25 percent per year. See also 12b-1 fee. open-end investment company. The legal name for a mutual fund, indicating that it stands ready to redeem (buy back) its shares from investors. See also mutual fund. 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 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 and other investment companies in which a fund aggregates the assets of investors who share common financial goals. A fund uses the pooled assets to buy a portfolio of investments, and each share purchased represents a shareholder’s pro rata ownership interest in the fund’s portfolio.

278

GLOSSARY

portfolio. A collection of investments owned by an individual or an institution (such as a mutual fund) that may include stocks, bonds, money market instruments, and other investments. portfolio manager. A specialist employed by a fund’s adviser to invest the fund’s assets in accordance with predetermined investment objectives. portfolio turnover rate. A measure of how frequently securities are bought and sold within a fund during a year. The portfolio turnover rate usually is expressed as a percentage of the total value of a fund. preferred stock. An investment that represents a share of ownership in a corporation that has a higher claim on the corporation’s assets and earnings than common stock. Preferred stock differs from common stock in that preferred stock generally pays a fixed dividend that must be paid out before dividends to common stock shareholders. Also known as preferred shares. See also common stock. 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. principal underwriter. A mutual fund underwriter enters into sales agreements with retail distributors (e.g., broker-dealers) of the mutual fund. To sell fund shares, a retail distributor must have executed a contract with a fund or its principal underwriter, which authorizes the distributor to offer and sell fund shares to the public. Generally speaking, a fund’s underwriter is not involved in the offer or sale of fund shares to investors. 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. Federal law requires that every mutual fund investor receive a prospectus. See also summary prospectus. 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. See redeem. registered investment company. Any fund—including a mutual fund—that is registered as an investment company with the SEC under the Investment Company Act of 1940. In addition to registering as an investment company under the Investment Company Act of 1940, shares of the registered investment company must be registered under the Securities Act of 1933 (if they are offered to the public) and the investment company’s investment adviser must be registered with the SEC under the Investment Advisers Act of 1940. Each of these acts imposes regulatory responsibilities on the entities or securities registered under such acts.

GLOSSARY

279

regulated investment company (RIC). A fund eligible under subchapter M of the Internal Revenue Code to eliminate tax at the entity level by distributing all of its taxable income to its shareholders. The fund’s income thus is taxed only once, at the investor level. A RIC may be organized in either corporate or trust form—but is treated in all cases as a corporation. To qualify as a RIC, a corporation must be registered at all times during the taxable year under the Investment Company Act of 1940 and must derive at least 90 percent of its income from certain sources, including dividends, interest, and capital gains. It also must distribute at least 90 percent of the dividends and interest received. repurchase agreements. A form of short-term funding that is typically used by dealers and other institutional investors. In a repurchase transaction, one party sells securities to another party and agrees to buy back the securities at a specified time (e.g., the next day) for a specified price. Also known as a repo. required minimum distribution (RMD). Rules under the Internal Revenue Code that require a person who owns a traditional IRA or 401(k) account to take annual distributions from the IRA or 401(k) account beginning at age 70½. The annual distribution amount is determined by formulas established by the IRS and must be calculated each year based on the owner’s age (or the ages of the owner and the owner’s spouse). The IRS formula is intended to ensure that the entire amount of a traditional IRA or 401(k) account be distributed over the expected life of the individual (or the joint lives of the individual and the individual’s spouse). 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. retail money market fund. A money market fund that has policies and procedures reasonably designed to limit all beneficial owners of the fund to natural persons. return. The gain or loss of a security in a particular period. It usually is quoted as a percentage. RIC. See regulated investment company. risk. The degree of uncertainty associated with the return on an asset. risk/return tradeoff. The principle that an investment must offer a higher expected return as compensation for the likelihood of higher volatility in returns. risk tolerance. An investor’s willingness to lose some or all of an investment in exchange for greater potential 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 401(k) plan. A type of account within a 401(k) plan to which after-tax contributions are made, and from which qualified distributions of contributions and earnings are tax-free. 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.

280

GLOSSARY

sales charge. The sales fee that may be imposed on mutual fund shares that are purchased through a broker-dealer or other financial intermediary. By regulation, mutual fund sales charges are capped. Sales charges may vary depending on where the shares are acquired (e.g., a fund supermarket or a broker-dealer), the amount invested, and the fund purchased. 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 assets (such as investment company shares [closed-end, UIT, and ETF]) from another investor through an intermediary such as a broker-dealer. sector fund. A fund that invests in a particular or specialized segment of the marketplace, such as stocks of companies in the software, healthcare, or real estate industries. securitization. The process of aggregating similar instruments, such as loans or mortgages, into a negotiable security, such as the creation of mortgage-backed securities. security. A general term for stocks, bonds, interests in funds, and other investments. 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. separate account. An insurance company account that is segregated or separate from the insurance company’s general assets. Also refers to a fund managed by an investment adviser for a single plan. 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 IRA 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. A representation of ownership in a company or investment fund. Also a synonym for stock. share classes. Some mutual funds offer investors different types of shares known as classes (e.g., Class A, institutional shares). 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). GLOSSARY

281

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. S&P 500 index. A daily measure of stock market performance based on 500 U.S. stocks chosen by Standard & Poor’s for market size, liquidity, and industry group representation. sponsor. A company or financial institution that creates a fund and determines its investment objective. When a new fund complex is launched, the fund sponsor (often an investment adviser) typically is the initial and sole shareholder of the new funds and elects the initial slate of directors. stable value fund. An investment fund that seeks to preserve principal and to provide consistent returns and liquidity. Stable value funds include collective investment funds sponsored by banks or trust companies or contracts issued by insurance companies. 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 fund’s SEC registration statement. stock. A share of ownership or equity in a corporation. stock fund. See equity fund. summary prospectus. SEC rules permit mutual funds to provide their investors with a brief summary (generally three to four pages) of key fund information instead of the fund’s longform, statutory prospectus if they make the statutory prospectus available online or by mail upon request and meet certain additional conditions. The summary prospectus must contain the following items in standardized order and cannot include additional information, nor omit required information: investment objectives/goals; fee and expense tables; principal investment strategies, principal risks and performance table; and management information. See also prospectus. target date fund. Funds designed to satisfy their investors’ investment objective by a particular target date, which is usually included in the name of the fund. For example, a Target Date 2025 fund may be designed for persons who plan to retire in 2025. To fulfill the investor’s investment objective, the fund is typically constructed as a hybrid fund that follows a predetermined reallocation of risk over the lifetime of the investment. These funds invest in a mix of asset classes and typically rebalance their portfolios over time to become more conservative and income producing as the fund approaches and passes its target date. Target date funds are most commonly used to save for retirement or education, where the owner of the account expects to use the account proceeds at a known future date. Also known as lifecycle fund. target risk fund. See lifestyle fund. 282

GLOSSARY

tender offer. In a closed-end fund tender offer, shareholders are given a limited opportunity to sell a portion of their shares back to the fund at a price—the tender price. Generally, the tender price is close to the fund’s net asset value (NAV) and is higher than the market price. total net assets. The total amount of assets, less any liabilities, a fund holds as of a certain date. 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 (NAV). 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. A transfer agent is the entity within a fund complex that maintains all shareholder account records, processes all transactions effected by shareholders, and provides shareholders who own shares directly with the fund communications regarding the fund or the shareholder’s account. Typically, when a mutual fund shareholder contacts the fund to discuss the shareholder’s account, it is the transfer agent that handles such inquiries. The transfer agent must be registered with the SEC under the Securities Exchange Act of 1934 and must perform its services pursuant to an agreement with the fund’s board. 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). trustee. A member of the board of trustees of a fund organized as a business or statutory trust. Mutual fund trustees oversee the management and operations of the fund and have a fiduciary duty to represent the interests of shareholders. Fund trustees have the same responsibilities as fund directors. See also director. 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. See principal underwriter. unit investment trust (UIT). A type of fund that blends characteristics of mutual funds and 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 it buys and holds a fixed portfolio of securities until the UIT’s set termination date, at which time the trust is dissolved and proceeds are paid to shareholders.

GLOSSARY

283

U.S. Treasury securities. Debt securities issued by the U.S. government and secured by its full faith and credit. Treasury securities are the debt financing instruments of the U.S. federal government, and they are often referred to simply as Treasuries. There are four types of Treasury securities: Treasury bills, Treasury bonds, Treasury notes, and Treasury inflation protected securities (TIPS). See also Treasury bill. 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. 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.

284

GLOSSARY

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.

A

accountants, 122, 122f, 123f, 247f actively managed bond funds, 96, 97f actively managed domestic equity funds, 18, 46, 47f actively managed equity funds, 94, 94f, 97f actively managed ETFs, 58–59, 62, 182t, 183t, 184t actively managed mutual funds, 96–97, 244, 269 administrators, 247f, 249 advisers, 269 client demographics, 154 compensation of, 102, 103–104, 106 employment as, 23 as intermediaries, 15, 15f, 33 IRA rollover advice from, 154, 154f mutual fund, 23, 247, 247f, 248–249, 259, 260 as purchase sources, 100–101, 102, 122, 122f, 123f regulation of, 243, 262 affiliated transactions, prohibitions on, 264 Africa region, 10f, 60f, 237t, 239t, 241t after-tax return, 269 age demographics bond fund owners, 43 DC plan owners, 139–140, 140f education savers, 165, 166f 401(k) owner account balances, 149, 149f 401(k) owner asset allocation choices, 145–146, 146f, 147f generational mutual fund ownership, 110–111, 114–115, 114f, 115f, 118, 118f Internet use and, 128, 129f IRA owners, 139–140, 140f, 154–155, 156f mutual fund owners, 113f, 114–115, 114f, 118–119, 118f retirement account owners, 139–140 savings goals and, 133, 134f agency securities, 14f, 15, 52, 52f, 211t, 212t all-in fees, 108 alternative minimum tax, 253 alternative strategies funds, 213t American Taxpayer Relief Act of 2012, 164 Americas region, 10f, 60f, 236t, 238t, 239t annual reports, 257, 261, 269 annuities, 73, 73f, 86, 86f, 136, 137f, 151f. See also variable annuities appreciation, 269 Asia-Pacific region, 10f, 60f, 237t, 239t, 241t asset allocation, 269 asset allocation funds. See hybrid funds asset allocation strategies 401(k) plans, 143, 144f 145–146, 146f, 147f, 148–149, 148f hybrid funds, 43–44

INDEX

asset allocation strategies (continued) IRAs, 155, 156f target date funds, 36, 43 asset-based fees, 103–104, 106 asset class, 269 assets, 269. See also retirement market assets asset-weighted turnover rate, 37, 37f auditors, 249, 261, 269 authorized participants, 62–64, 63f, 269 average portfolio maturity, 269

B

Baby Boom Generation, 43, 110–111 back-end load, 90, 104, 269 back-end load share classes, 101, 104f, 105f balanced funds. See also hybrid funds; lifestyle funds; target date funds in households owning mutual funds, 127, 127f non–target date, 144f, 145, 146f, 155, 156f bank notes, 211t, 212t banks as custodians, 263 as intermediaries, 15, 15f money market deposit accounts, 50, 51f as mutual fund purchase sources, 122, 122f, 123f retirement assets held by, 151f basis points, 90n, 270 bear market, 270 benchmark, 270 blend funds, 99f, 223t, 224t boards of directors, 246, 247f, 248, 258, 259 bond and hybrid ETFs, 65f, 70–71, 70f, 71f bond and income funds, 174t, 176t bond closed-end funds, 77f, 80–81, 80f, 81f, 84, 156f, 180t, 181t bond ETFs, 40, 67, 67f, 72, 156f, 182t, 183t, 184t bond funds, 270. See also government bond funds; high-yield bond funds; investment grade bond funds; multisector bond funds; municipal bond funds; world bond funds alternative strategies, 213t assets, total net, 8, 10f, 28, 29f, 174t, 175t, 231t asset share at largest complexes, 18 capital gains distributions, 255 capital gains paid and reinvested, 201t closed-end, 77f, 80–81, 80f, 81f, 84, 180t, 181t DC plan assets in, 234t demand for, 28, 30, 39 demographic effects on, 43 dividends paid and reinvested, 200t, 253, 254 in ETF-owning households, 73, 73f

285

bond funds (continued) exchange redemptions, 191t, 196t exchange sales, 191t, 194t expense ratios, 95 expenses, 90, 91f, 97f, 98, 99f, 103f as 401(k) investment options, 144f, 145, 146f household ownership of, 30f, 86, 86f in households owning mutual funds, 127, 127f individual accounts, 231t institutional accounts, 231t, 232t IRA assets in, 155, 156f, 235t liquidity, 39–42, 186t, 187t net new cash flow, 11, 18, 30, 31f, 35f, 38–43, 38f, 188t, 191t, 192t new sales, 191t, 193t number of funds, 176t, 177t number of share classes, 178t, 179t portfolio activity, 205t portfolio holdings and percentage of total net assets, 199t redemptions, 39–42, 40f, 41f, 42f, 191t, 195t, 197t retirement assets in, 121, 159, 159f, 160f, 161 returns on, 38f target date funds’ effect on, 43 taxable, 99f, 174t, 176t, 178t taxable closed-end, 80f, 180t, 181t tax-exempt, 253 trends, 18, 28, 29f, 38–43, 38f, 40f, 41f, 42f variable annuity, 229t, 230t bond funds of funds, 216t, 217t bond index funds. See index bond funds bond market, 33 bond market performance and ETF demand, 70 bonds, 270. See also municipal bonds directly held, 11, 12f, 73f, 86f, 86 IRA investments in, 151, 151f, 155, 156f returns on, 38–39, 38f tender option, 83, 85, 85f yields, 32, 33 breakpoint discounts, 100 breakpoints, 270 break the dollar, 270 broad-based domestic equity ETFs, 58, 70, 70f, 71f, 182t, 183t, 184t broker, 270 brokerage firms, 15, 15f, 151, 151f broker-dealers, 59, 243, 249, 270 bull market, 270 business corporation assets, 14, 28, 232t, 233t

C

capital appreciation equity funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 192t new sales, 193t

286

capital appreciation equity funds (continued) number of funds, 177t number of share classes, 179t redemptions, 195t capital gain, 271 capital gains distributions, 10, 252–253, 255, 255f, 271 capital gains paid and reinvested, 201t capital loss, 253, 271 catch-up contributions, 152, 271 CDSL (contingent deferred sales load), 101, 271 certificates of deposit (CDs), 211t, 212t, 271 CFTC (Commodity Futures Trading Commission), 60 Chicago Board Options Exchange Volatility Index (VIX), 35 China, 32, 33, 39 CITs (collective investment trusts), 44, 46, 47f closed-end funds, 271 assets, 9f, 79–80, 79f, 180t bond, 77f, 80–81, 80f, 81f, 84, 156f, 180t, 181t characteristics, 76, 78, 245 common shares, 78, 79, 84, 84f, 263 creation of, 78 custody rules, 263n disclosure requirements, 256n distributions, 82, 82f diversification standards, 265 domestic bond, 80f, 81f, 180t, 181t domestic equity, 80f, 81f, 180t, 181t equity, 80–81, 80f, 81f, 84, 156f, 180t, 181t global/international, 80f, 81f, 180t, 181t household ownership of, 11f, 12f, 86, 86f, 87f IRA investments in, 151, 151f leverage ability, 83–85, 83f, 84f, 85f, 262–263 liquidations or closures, 79 liquidity and valuation, 258 municipal bond, 80f, 81f, 180t, 181t net issuance, 10, 81, 81f, 181t number of funds, 22, 22f, 79, 79f, 180t preferred shares, 78, 79, 84, 84f, 263 pricing, 258–259 redemptions, 181t shareholder characteristics, 87f shareholder demographics, 86, 86f, 87f taxable bond, 80f, 81f, 180t, 181t total net assets, 9f trading, 78 collective investment trusts (CITs), 44, 46, 47f commercial paper, 14f, 15, 211t, 212t, 271 commission, 271 commodities funds, 8 commodities markets, 32, 39 commodity ETFs, 58, 60, 61f, 70, 70f, 71f, 182t, 183t, 184t Commodity Exchange Act, 60 Commodity Futures Trading Commission (CFTC), 60 commodity markets, 70 common stock, 271 common stock portfolio holdings, 198t, 199t common stock purchases, sales, and net purchases, 202t, 203t, 204t, 205t

INDEX

company stock holdings, 145, 146f, 147f compliance policies and procedures. See regulation of investment companies compounding, 271 confidence of consumers, 128f, 128, 243 Consumer Price Index, 31 consumer sector funds, 225t, 226t contingent deferred sales load (CDSL), 101, 271 corporate bond funds. See high-yield bond funds; investment grade bond funds corporate bond portfolio holdings, 198t, 199t corporate bonds, 14f, 15, 271 corporate notes, 211t, 212t cost basis, 253 costs. See mutual fund expenses and fees Coverdell Education Savings Accounts (ESAs), 30f, 124f, 164–166, 166f, 167f, 272 creation units, 62–63, 63f, 272 credit quality, 272 credit risk, 272 currency ETFs, 58, 60, 61f custodians, 247f, 263, 272

D

DC plans. See defined contribution plans dealers, 272 default, 272 defined benefit (DB) plans, 121, 132, 135, 136–139, 136f, 137f, 138f, 139f, 153, 272 defined contribution (DC) plans, 272. See also 401(k) plans; 403(b) plans; 457 plans; Keoghs; Thrift Savings Plans asset location, 122f assets, 136–140, 137f, 138f, 140f, 141, 141f, 234t characteristics, 141 CITs in, 46, 47f closed-end fund investors, 87f in ETF-owning households, 73 household ownership of, 12, 13f, 136–140, 136f, 139f, 139, 140f index funds in, 163, 163f IRA rollovers from, 121, 153 lifestyle funds in, 162f, 163, 163f mutual fund assets in, 12, 121, 122f, 123f, 124, 124f, 159–161, 159f, 160f mutual fund fees, 102, 106 net new cash flow, 234t owner demographics, 129f, 136f, 139–140, 140f percentage of retirement assets in, 131f purchase sources, 122f, 123f retirement resource pyramid and, 132, 135, 136f target date funds in, 43, 162f, 163, 163f total net assets, 234t Delaware statutory trusts, 245–246, 246f demographics. See also age demographics; income demographics closed-end fund investors, 86, 86f, 87f DC plan investors, 136f, 139–140, 140f education level, 129f

INDEX

demographics (continued) education savings investors, 165, 166f ETF investors, 73–75, 73f, 74f, 75f 401(k) plan participants, 129f, 145–147, 146f, 147f, 149, 149f Internet use by shareholders, 128, 129f IRA investors, 139–140, 140f, 155, 156f mutual fund investors, 113f, 116–117, 117f mutual fund trends and, 28, 30 retirement plan investors, 139–140 savings goals and, 133, 134f depreciation, 272 derivative instruments, 42, 85, 262 directors, 246, 247f, 248, 258, 259, 272 disclosure, 65–66, 256–257 discount brokers, 122–123, 122f, 123f distributions, 273 capital gains, 10, 201t, 252–253, 255, 255f dividend, 10, 200t, 210t, 252–254, 254f from IRAs, 157–159, 157f, 158f diversification, 36, 265, 273 dividend, 273 dividend distributions, 10, 200t, 210t, 252–254, 254f dollar-cost averaging, 273 domestic bond closed-end funds, 80f, 81f, 180t, 181t domestic bond funds, 143, 144f domestic equity closed-end funds, 80f, 81f, 180t, 181t domestic equity ETFs, 36, 46, 47f, 65f, 67f, 70f, 72, 182t, 183t, 184t domestic equity funds actively managed, 18, 46, 47f alternative strategies, 213t assets, total net, 8, 10f, 174t DC plan assets in, 234t expense ratios, 92f as 401(k) investment options, 143, 144f IRA assets held in, 235t net new cash flow, 36 number of funds, 176t number of share classes, 178t retirement assets in, 160, 160f trends in, 18, 33, 36 domestic equity index funds. See index domestic equity funds domestic high-yield bond ETFs, 64, 65f, 67, 67f domestic municipal bond closed-end funds, 80f, 81f, 180t, 181t domestic sector equity ETFs, 70, 70f, 71f, 182t, 183t, 184t domestic taxable bond closed-end funds, 80f, 81f, 180t, 181t

E

economic climate, 18–19, 26, 28, 30–33, 44, 140 Economic Growth and Tax Relief Reconciliation Act (EGTRRA), 164 EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system, 258 education, as savings goal, 120, 120f, 164–165, 165f, 166f education IRA. See Coverdell Education Savings Accounts emerging markets, 33, 273

287

emerging market bond ETFs, 64, 65f, 67, 67f emerging market bond funds, 33 emerging market debt mutual funds, 214t emerging market equity ETFs, 64, 65f, 67, 67f emerging market ETFs, 71f Employee Benefit Research Institute (EBRI), 145 Employee Retirement Income Security Act (ERISA), 150, 152 employer-sponsored retirement plans. See also defined contribution plans; 401(k) plans; 403(b) plans; 457 plans; SAR-SEP IRAs; SEP IRAs; SIMPLE IRAs assets, 136–140, 137f, 138f, 139f fee structures for, 100 as first mutual fund purchase, 118–119, 119f household accounts, 11f, 121–123, 122f, 123f, 124f, 139–140, 139f mutual fund assets in, 121, 122f purchase sources, 121–123, 122f, 123f retirement resource pyramid and, 132, 133f, 135, 136f rollovers from, 121, 153–154, 153f, 154f target date and lifestyle fund assets, 161–163, 162f, 163f employment, investment industry, 23–25, 23f, 24f, 25f energy sector, 32, 33, 36, 39, 71 equities. See also stock directly held, 11, 12f, 86, 86f, 87f as 401(k) investment options, 145, 147, 147f as investment company assets, 14, 14f IRA assets in, 155, 156f, 160–161, 160f retirement assets in, 160–161, 160f equity, 273 equity closed-end funds, 80–81, 80f, 81f, 84, 156f, 180t, 181t equity ETFs, 36, 65f, 67, 67f, 74, 156f, 182t, 183t, 184t equity funds, 273. See also capital appreciation equity funds; domestic equity funds; index equity funds; total return equity funds; world equity funds alternative strategies, 213t assets, total net, 8, 28, 29f, 174t, 175t, 231t capital gains distributions, 255 capital gains paid and reinvested, 201t closed-end, 80–81, 80f, 81f, 84, 180t, 181t DC plan assets in, 234t demand for, 28 diversification of, 265 dividends paid and reinvested, 200t in ETF-owning households, 73, 73f exchange redemptions, 189t, 196t exchange sales, 189t, 194t expenses, 88, 89f, 90, 91f, 93–97, 93f, 94f, 97f, 98, 99f, 103f, 107f, 108, 109f 401(k) expenses, 109f as 401(k) investment options, 144f, 145, 146f, 147 household ownership of, 30f, 86, 86f in households owning mutual funds, 127, 127f individual accounts, 231t institutional accounts, 231t, 232t IRA assets held in, 155, 156f, 235t liquidity, 186t, 187t

288

equity funds (continued) net new cash flow, 30, 31f, 34, 34f, 35f, 36, 188t, 189t, 192t new sales, 189t, 193t number of funds, 176t, 177t number of share classes, 178t, 179t portfolio activity, 203t portfolio holdings and percentage of total net assets, 199t redemptions, 189t, 195t, 197t retirement assets in, 121, 159, 159f, 160, 160f returns, 33 target date funds’ effect on, 43 trends, 28, 29f, 34–37, 34f, 35f, 37f turnover rate, 37, 37f variable annuity, 229t, 230t equity funds of funds, 216t, 217t equity index funds. See index equity funds ERISA (Employee Retirement Income Security Act), 150, 152 ESAs (Coverdell Education Savings Accounts), 30f, 124f, 164–166, 166f, 167f, 272 ETFs. See exchange-traded funds euro-denominated securities, 8 eurodollar CDs, 211t, 212t European money market, 54 European mutual fund market, 10f, 60f, 236–237t, 238–239t, 240–241t eurozone economic climate, 32 exchange privilege, 254, 273 exchanges of shares, 253 exchange-traded funds (ETFs), 273 actively managed, 58–59, 62, 182t, 183t, 184t arbitrage opportunities, 66 assets, total net, 8, 9f, 56, 60, 60f, 61f, 71f, 182t assets at largest complexes, 17, 17f assets worldwide, 10f, 60, 60f authorized participants, 62–64 bond, 72, 156f, 182t, 183t, 184t bond and hybrid, 65f, 70–71, 70f, 71f broad-based domestic equity, 58, 70, 70f, 71f, 182t, 183t, 184t characteristics, 58–59, 245 commodity-based, 58, 60, 70, 70f, 71f, 182t, 183t, 184t creation of, 62–63, 63f, 66, 72, 72f currency-based, 58, 60 demand for, 10, 36, 56, 69–72, 69f, 70f, 71f, 72f diversification with, 265 domestic equity, 47f, 65f, 70–72, 70f, 71f, 182t, 183t, 184t domestic high-yield bond, 64, 65f, 67, 67f domestic sector equity, 70, 70f, 71f, 182t, 183t, 184t emerging markets, 64, 65f, 71f equity, 156f funds of funds structure, 182t, 183t, 184t futures-based, 58, 60 global/international equity, 70–71, 70f, 71f, 182t, 183t, 184t

INDEX

exchange-traded funds (continued) history, 58–59 household ownership of, 11f, 12f, 73–75, 73f, 74f, 75f hybrid, 182t, 183t, 184t index-based, 46, 47f, 58, 61–62, 72, 182t, 183t, 184t institutional investors in, 14 international equity, 65f IRA investments in, 151, 151f large-, mid-, and small-cap equity, 71, 71f leverage limits, 262–263 liquidations, 72, 72f liquidity of, 258 liquidity providers, 64, 65f mutual funds compared with, 67–68 net asset value, 59, 62, 67 net issuance, 10, 56, 57, 69–70, 69f, 70f, 184t nonregistered, 60, 61f, 69f, 182t, 183t, 184t number of funds, 22, 22f, 60, 61f, 72, 72f, 183t origination of, 61–63 pricing, 59, 65–66, 258, 258n8 primary markets, 62, 63f, 64 redemptions, 63, 66 registered, 60, 61f, 69f, 182t, 183t, 184t regulation of, 60, 256–257, 263n secondary markets, 63, 63f, 64, 65f, 66–68, 67f sector equity, 182t, 183t, 184t shareholder demographics, 73f shareholders, 73–75, 74f, 75f sponsors, 61–62 trading, 59, 63, 65–68, 65f, 67f transparency, 65–66 trends, 30 ex-dividend date, 274 exempt-interest dividends, 253 expense ratio, 92–94, 92f, 274. See also mutual fund expenses and fees

F

face value, 274 fair value, 258, 274 Federal Employees Retirement System (FERS), 137f, 141 federal funds interest rate, 32, 274 federal government employee retirement assets, 135–136, 136f, 137f, 138, 138f, 141 Federal Reserve, 32, 33, 38, 39, 50, 54 fees. See commission; sales charge financial advisers. See advisers Financial Industry Regulatory Authority (FINRA), 243, 259, 261, 274 financial institution assets, 29, 232t, 233t financial sector funds, 225t, 226t financial services companies, 15, 15f financial statements, 274 529 plans, 30f, 124f, 164–165, 165f, 167f, 274 FINRA (Financial Industry Regulatory Authority), 243, 259, 261, 274 fixed annuities, 73, 73f, 86, 86f, 137f fixed-income market, 40–42

INDEX

fixed-income securities, 62, 73, 108, 155, 156f, 161, 274 flexible portfolio funds, 44 floating-rate high-yield bond mutual funds, 215t foreign securities, 62. See also global/international entries; world entries forward pricing, 59, 258–259, 274 457 plans, 274 assets, 124f, 137f, 141, 141f as first mutual fund purchase, 119f household financial assets in, 13f index funds in, 163f investor demographics, 129f lifestyle funds in, 162f, 163f mutual fund assets in, 122f, 123f, 124f, 160, 160f near-retiree accounts, 136f purchase sources, 122f, 123f, 124f target date funds in, 162f, 163f 401(k) plans, 274 account balances, 149, 149f asset allocation choices, 143, 144f, 145–146, 146f, 147f, 148–149, 148f assets, 124f, 137f, 141, 141f characteristics, 142, 143f CITs in, 46, 47f employer contributions to, 142, 143f employer investment options, 143 as first mutual fund purchase, 119f household financial assets in, 12, 13f index funds in, 163f investor demographics, 129f, 145–147, 146f, 147f, 149, 149f IRA rollovers from, 121 lifestyle funds in, 162f, 163f loan activity, 150 loan features, 142, 143f mutual fund assets in, 121, 122f, 123f, 124f, 160, 160f mutual fund fees, 102, 104f, 105f, 106–109, 107f, 109f mutual fund investments by, 108 near-retiree accounts, 136f plan design, 142, 143f purchase sources, 121, 122f, 123f, 124f services and expenses, 106–109, 107f, 109f target date funds in, 144f, 145, 146f, 148–149, 148f, 162f, 163f 403(b) plans, 275 assets, 124f, 137f, 141, 141f characteristics, 142, 143f as first mutual fund purchase, 119f household financial assets in, 13f index funds in, 163f investor demographics, 129f lifestyle funds in, 162f, 163f mutual fund assets in, 122f, 123f, 124f, 160, 160f near-retiree accounts, 136f plan design, 142, 143f purchase sources, 122f, 123f, 124f target date funds in, 162f, 163f

289

front-end load, 90, 102, 103f, 104f, 105f, 275 front-end load share classes, 100, 104, 105f full-service brokers, 122, 122f, 123f fund family, 275 funds of funds, 43, 182t, 183t, 184t, 216t, 217t, 275 fund supermarket, 122–123, 122f, 123f, 275 futures ETFs, 58, 60, 61f

G

Generation X, 114–115, 114f, 115f, 118, 118f GICs (guaranteed investment contracts), 143, 144f, 145, 146f GI Generation, 114–115, 114f, 115f, 118, 118f global economic climate, 28, 30, 32–33, 34, 34f global equity funds, 34, 34f global/international bond closed-end funds, 80f, 81, 81f, 180t, 181t global/international equity closed-end funds, 80f, 81, 81f, 180t, 181t global/international equity ETFs, 70–71, 70f, 71f, 182t, 183t, 184t government agency securities, 14f, 15, 52, 52f, 211t, 212t government bond, 275 government bond funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t government bond portfolio holdings, 198t, 199t government employee retirement assets, 135–136, 136f, 137f, 138, 138f, 141 government money market funds, 48, 48f, 53, 53f, 206t, 207t, 208t, 211t, 244, 275 government securities, 275 gross domestic product, 31 growth funds, 98, 99f, 223t, 224t guaranteed investment contracts (GICs), 143, 144f, 145, 146f

H

health sector funds, 225t, 226t hedge funds, 275 high-yield bond ETFs, 40, 64, 65f, 67, 67f, 68, 68f high-yield bond funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t floating-rate, 215t holdings categories, 41, 41f liquidity, 187t net new cash flow, 39–40, 40f, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 39, 40, 41, 195t returns, 33

290

high-yield bond market, 68 homeownership as retirement resource, 132, 133f, 135 household financial assets. See also demographics; mutual fund shareholders; retirement market assets; individual investors; specific classification, such as bond funds asset location of, 121–124, 122f, 123f capital gains distributions, 255, 255f of closed-end fund owners, 86, 86f, 87f closed-end funds as, 86, 86f, 87f DC plans, 12, 13f directly held stocks and bonds, 11, 12f dividend distributions, 254, 254f education savings plans, 120, 120f, 164–166, 165f, 166f employer-sponsored retirement plans, 121–123, 122f, 123f, 124f ETFs, 11f, 12f, 73–75, 73f, 74f, 75f investment company holdings, 11–12, 11f investment goals and, 33, 113f, 133, 134f, 164 investor sentiment and, 125, 125f IRAs, 11f, 12, 13f, 121, 122f, 123f, 124, 124f, 152–155, 152f, 156f long-term mutual funds, 33 mutual funds, 11–12, 11f, 12f, 13f, 28–29, 30f, 86, 86f, 87f, 93, 110, 112–117, 112f, 113f, 121–124, 122f, 123f, 124f mutual funds by tax status, 251, 251f purchase sources, 102, 122–123, 122f, 123f retirement accounts, 12, 13f, 121–124, 122f, 123f, 124f, 134f retirement resource pyramid and, 133f savings goals of investors, 28, 113f, 120, 120f, 133, 134f, 165–166, 166f, 167f taxable accounts, 251, 251f, 254–255, 254f, 255f tax-deferred accounts, 251, 251f, 254–255, 254f, 255f tax-exempt accounts, 251, 251f, 254, 254f variable annuities, 12f, 73, 73f, 86, 86f hybrid ETFs, 182t, 183t, 184t hybrid funds, 275. See also target date funds alternative strategies, 213t assets, total net, 8, 10f, 29f, 174t, 175t, 231t capital gains distributions, 255 capital gains paid and reinvested, 201t characteristics, 43–44, 161 closed-end fund owner holdings of, 86f DC plan assets in, 163f, 234t demand for, 28, 43–44 dividends paid and reinvested, 200t exchange redemptions, 190t, 196t exchange sales, 190t, 194t expenses, 90, 91f, 99f, 103f household ownership of, 30f individual accounts, 231t institutional accounts, 231t, 232t IRA assets held in, 235t lifestyle funds, 161–163, 227t, 228t liquidity, 186t, 187t net new cash flow, 30, 31f, 35f, 43–44, 188t, 190t, 192t

INDEX

hybrid funds (continued) new sales, 190t number of funds, 176t, 177t number of share classes, 178t, 179t portfolio activity, 204t portfolio holdings and percentage of total net assets, 199t redemptions, 190t, 195t, 197t retirement assets in, 121, 159, 159f, 160f, 161, 162f trends, 28, 29f, 43–44 variable annuity, 229t, 230t hybrid funds of funds, 216t, 217t hybrid index funds. See index hybrid funds

I

IIV (intraday indicative value), 65–66, 276 income demographics closed-end fund owners, 86, 87f education savers, 165, 166f ETF owners, 73, 74f Internet access and, 129f IRA-owning households, 155 mutual fund owners, 116–117, 116f, 117f retirement savings and, 133, 136f total personal income, 31 income distributions, 252, 275 independent directors, 259, 275 independent financial planners, 122, 122f, 123f independent fund advisers, 15, 15f independent public accountants, 275 index, 276 index bond funds, 44, 45f, 95–96, 95f, 97f, 218t, 219t, 220t, 221t index domestic equity funds, 18, 44, 45f, 46, 47f, 218t, 219t, 220t, 221t index equity funds assets, total net, 44, 45f, 218t domestic, 18, 44, 45f, 46, 47f, 218t, 219t, 220t, 221t exchange sales, 220t expenses, 94–97, 94f, 95f, 97f, 99f hybrid and bond, 218t, 219t, 220t, 221t net new cash flow, 45f, 46, 218t new sales, 220t number of funds, 219t number of share classes, 219t redemptions and exchange redemptions, 221t S&P 500, 218t, 219t, 220t, 221t world, 44, 45f, 218t, 219t, 220t, 221t index ETFs, 46, 47f, 58, 61–62, 72, 182t, 183t, 184t index funds, 276. See also index bond funds; index equity funds; index hybrid funds asset share at largest complexes, 18 assets, total net, 44, 45f, 46f, 95, 95f, 218t in DC plans, 163, 163f exchange sales, 220t expenses and fees, 95–97, 95f, 97f hybrid, 45f, 95, 95f net new cash flow, 18, 44, 45f, 46, 218t

INDEX

index funds (continued) new sales, 220t number of funds, 95f, 219t number of share classes, 219t redemptions and exchange redemptions, 221t S&P 500, 218t, 219t, 220t, 221t trends, 18, 44–46, 45f, 46f, 47f, 95–97, 95f, 97f index hybrid funds, 44, 45f, 95, 95f, 218t, 219t, 220t, 221t index world equity funds, 44, 45f, 218t, 219t, 220t, 221t individual investors. See also demographics; household financial assets; mutual fund shareholders; shareholder sentiment bond funds held by, 231t equity funds held by, 231t ETFs held by, 69, 73–75, 73f, 74f, 75f hybrid funds held by, 231t market events’ effect on, 33 mutual fund ownership by, 112–117, 112f, 113f, 114f risk tolerance of, 35, 74, 75f, 125–127, 126f total net assets held by, 231t individual retirement accounts (IRAs), 276. See also Roth IRAs; SAR-SEP IRAs; SEP IRAs; SIMPLE IRAs assets, total net, 136–140, 137f, 138f, 139f, 151, 151f, 235t bonds and bond funds in, 151, 151f, 155, 156f catch-up contributions, 152 characteristics, 150 closed-end funds, 87f, 151, 151f contributions to, 153, 153f distributions from, 157–159, 157f, 158f equities and equity funds in, 151, 151f, 155, 156f estimated net new cash flow, 235t ETF investments in, 151, 151f in ETF-owning households, 73 household asset location, 121 household ownership of, 11f, 12, 13f, 30f, 121, 122f, 123f, 124, 124f, 136–140, 136f, 139f, 140f, 152–155, 52f, 156f investor demographics, 139–140, 140f, 154–155, 156f investor portfolios, 155, 156f lifestyle funds in, 162f money market funds in, 155, 156f mutual fund fees, 104f, 105f mutual funds held in, 12, 121, 122f, 123f, 124, 124f, 151, 151f, 159–161, 159f, 160f percentage of retirement assets in, 131f retirement resource pyramid and, 132, 133f, 135, 136f rollovers into, 121, 153–154, 153f, 154f target date funds in, 155, 156f, 162f inflation, 32, 276 inflation-protected mutual funds, 222t inflation risk, 276 initial public offerings (IPOs), 276 institutional investors, 276 bond funds held by, 231t, 232t equity funds held by, 231t, 232t ETFs held by, 14, 69 hybrid funds held by, 231t, 232t

291

institutional investors (continued) market events’ effect on, 33 money market funds held by, 14, 29, 30f mutual funds held by, 29, 30f total net assets held by, 231t, 232t, 233t types, 232t, 233t institutional money market funds, 276 assets, total net, 53, 207t, 231t, 232t, 233t demand for, 14, 28–29, 30f, 49–50 government, 207t, 208t net new cash flow, 49, 49f, 50f, 208t nonfinancial business assets, 49, 49f prime, 52–53, 52f, 53f, 207t, 208t regulation of, 52–53, 244 taxable, 207t, 208t, 233t tax-exempt, 207t, 208t trends, 28, 49–50, 49f, 50f, 51f, 52–53, 52f institutional no-load share classes, 92, 104f, 105f insurance companies, 15, 15f, 122, 122f, 123f interest, 276 interest rate risk, 276 interest rates, 26, 32, 38, 39, 50, 276 interest rate spread, 51f intermediaries, 15, 15f, 22, 22f international bond funds, 41, 144f international equity ETFs, 65f, 67f international equity funds, 96, 143, 144f international stock market performance, 8, 34, 34f, 36 Internet use by shareholders, 128, 129f intraday indicative value (IIV), 65–66, 276 investment advisers, 276. See also advisers Investment Advisers Act of 1940, 243 investment companies, 276. See also closed-end funds; exchange-traded funds; money market funds; mutual fund entries; regulation of investment companies; unit investment trusts assets, 8, 9f corporate equity held by, 14f definition, 8n directly held stocks and bonds vs., 11, 12f employment data, 23–25, 23f, 24f, 25f entering and leaving business, 16–19, 16f, 17f, 19f, 22, 22f history, 242–243, 266–268 household ownership of, 11–12, 12f net new cash flow, 10, 17f number of, 16–19, 16f, 17f, 22, 22f role of, 14–15 securities held by, 14–15, 14f types, 15f, 22, 22f, 244 Investment Company Act of 1940, 46, 243. See also regulation of investment companies ETF authorization and, 60 regulatory authority of, 243, 244, 246, 248, 258, 259n10, 260, 262–265 12b-1 fees, 100 investment grade bond funds assets, total net, 175t

292

investment grade bond funds (continued) exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 39, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t investment objective classifications, 54 investment objectives, 98, 99f, 248, 277 investment professionals. See advisers investment return, 277 investment risk, 277. See also risk tolerance investor sentiment, 35, 125, 125f IPOs (initial public offerings), 276 IRA Investor Database, 153, 155 IRAs. See individual retirement accounts issuers, 277

K

Keoghs, 13f, 124f, 137f, 141, 141f, 151f, 160f, 162f, 163f, 277

L

large-cap domestic equity ETFs, 71, 71f large-cap domestic equity funds, 33 large-cap equity funds, 96, 98 large-cap mutual funds, 223t, 224t level load, 90, 277 level-load share classes, 101, 104f, 105f leverage, 83–85, 83f, 84f, 85f, 262–263 lifecycle funds. See target date funds life insurance companies, 137f, 146f, 147f, 148f, 151f lifestyle funds, 161–163, 162f, 227t, 228t, 277 liquid alternative funds, 42 liquid asset portfolio holdings, 198t, 199t liquidity, 258–259, 277 liquidity ratio, 186t, 187t load (sales charge), 90, 102–106, 103f, 104f, 105f, 281 load funds, 277 load share classes, 100–101 local government employee retirement plans, 136, 137f, 138, 138f, 141 long-term bond yields, 32, 33 long-term capital gains, 252, 253, 255f long-term interest rates, 32, 38 long-term mutual funds, 277. See also bond funds; equity funds; hybrid funds; mutual fund entries annual redemption rates, 197t assets, total net, 8, 28, 29f, 30f, 105f, 198t capital gains paid and reinvested, 201t demand for, 28, 29f dividends paid and reinvested, 200t exchange redemptions, 196t exchange sales, 194t expense ratios, 92–94, 92f household ownership of, 12f, 29, 30f institutional investments in, 29, 30f liquid assets and liquidity ratio, 186t, 187t

INDEX

long-term mutual funds (continued) net new cash flow, 10, 11, 17f, 30, 31f, 35f, 104f, 188t, 192t new sales, 193t portfolio activity, 202t portfolio holdings and percentage of total net assets, 198t, 199t redemptions, 195t, 197t retirement assets in, 121, 124, 124f, 159 trends, 26, 33–44 long-term U.S. government bond portfolio holdings, 198t, 199t

M

management fees, 248, 277 market capitalization, 223t, 224t market value, 277 Maryland corporations, 245–246, 246f Massachusetts business trusts, 245–246, 246f maturity, 277 mid-cap equity ETFs, 71f mid-cap equity funds, 96, 98 mid-cap mutual funds, 223t, 224t Millennial Generation, 114–115, 114f, 115f, 118, 118f money funds, 143, 144f, 145, 146f money market, 278 money market deposit accounts, 50, 51f money market funds, 278. See also institutional money market funds; retail money market funds; taxable money market funds; tax-exempt money market funds asset composition of, 211t, 212t assets, total net, 8, 10f, 28, 29f, 30f, 174t, 175t, 206t, 207t, 231t characteristics, 244 closed-end fund owner holdings of, 86f commercial paper holdings, 14f, 15 DC plan assets in, 234t demand for, 28, 48–51 dividend distributions, 254 dividends paid and reinvested, 210t exchange redemptions, 209t exchange sales, 209t expenses, 98, 99f Federal Reserve lending facilities, 54 government, 206t, 207t, 208t, 211t household ownership of, 29, 30f, 124, 124f in households owning mutual funds, 127, 127f individual accounts, 231t institutional money market funds, 50f, 52–53, 207t, 208t, 233t as investment company assets, 14–15 IRA assets in, 155, 156f, 235t liquidity requirements, 259n11 net new cash flow, 10, 30, 31f, 48, 48f, 50f, 51f, 208t, 209t new sales, 209t number of funds, 176t, 177t, 206t number of share classes, 178t, 179t, 206t

INDEX

money market funds (continued) prime, 15, 48f, 52–53, 52f, 53f, 206t, 207t, 208t, 212t, 244 redemptions, 209t reforms to, 52–53, 52f, 53f regulation of, 52–53, 52f, 244 retail money market funds, 50, 50f, 51f, 207t, 208t, 233t retirement assets in, 121, 124, 124f, 159, 159f, 160f, 161 trends, 26, 28, 29f, 48–51, 48f, 49f, 50f, 51f, 52f, 53f variable annuity, 229t, 230t yields, 50 money purchase plans, 141f Morningstar, 257 mortgage-backed securities, 38 MSCI All Country World Daily Gross Total Return Index, 34, 34f multi-cap mutual funds, 223t, 224t multisector bond funds alternative strategies, 213t assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t municipal bond closed-end funds, 80f, 81f, 180t, 181t municipal bond funds. See also national municipal bond funds; state municipal bond funds assets, total net, 174t closed-end fund assets, 80f, 81f, 180t, 181t expense ratios, 99f number of funds, 176t number of share classes, 178t redemptions, 41 municipal bond portfolio holdings, 198t, 199t municipal bonds, 14f, 15, 253 municipal money market funds, 244 mutual fund characteristics. See also mutual fund industry data; regulation of investment companies definition and overview, 244 distribution types, 252, 254f, 255f ETFs compared with, 67–68 history, 266–268 net asset value, 59, 62, 244, 258–259 organizational structure, 245–249, 246f, 247f pricing, 59, 258–259 redeemable securities, 244, 258–259 tax features, 250–255, 251f, 254f, 255f turnover rate, 37, 37f valuation, 258–259 mutual fund companies investor views of, 125, 125f purchases directly from, 122–123, 122f, 123f mutual fund complexes, 16–19, 16f, 17f, 19f. See also investment companies

293

mutual fund expenses and fees. See also specific classification, such as equity funds actively managed funds, 94, 94f all-in fees, 108 asset-based, 103–104, 106 back-end load, 90, 101, 104, 105f DC plans, 102, 106 disclosure of, 256 economies of scale and, 93, 96, 108 expense ratios, 90, 92–94, 98, 99f 401(k) plans, 102, 104f, 105f, 106–109, 107f, 109f front-end load, 90, 100, 102, 103f, 104, 104f, 105f fund size and, 92, 92f index funds, 95–97, 95f, 97f institutional no-load shares, 92, 104f, 105f investment objectives and, 98, 99f level-load, 90, 101, 104f, 105f load fees, 102–106 management fees, 248 no-load shares, 92, 100, 101, 104–106, 104f, 105f ongoing expenses, 90 share class and, 104f, 105f shareholder views about, 93–94, 93f, 94f, 97 structures of, 100–101, 104f, 105f target date funds, 94, 94f, 99f trends, 90–97, 91f, 92f, 93f, 94f, 97f 12b-1 fees, 90, 96, 100, 101, 103 mutual fund industry data. See also long-term mutual funds; money market funds; mutual fund trends assets, total net, 6, 7f, 9f, 10f, 26, 28, 29f, 30f, 172t, 174t, 175t, 231t, 236–237t asset share at largest complexes, 17, 17f assets worldwide, 10f capital gains distributions, 10, 252–253, 255, 255f dividend distributions, 10, 200t, 210t, 252–254, 254f exchange redemptions, 173t exchange sales, 173t net new cash flow, 10, 26, 30, 31f net sales, 240–241t new sales, 173t number of funds, 22, 22f, 172t, 176t, 177t, 238–239t, 246f number of share classes, 172t, 178t, 179t redemptions, 173t research publications, xi–xiv total net assets by tax status, 251, 251f total sales, 173t worldwide net sales, 240–241t worldwide number of funds, 238–239t worldwide total net assets, 236–237t mutual funds, 278. See also investment companies; long-term mutual funds; mutual fund characteristics; mutual fund industry data; regulation of investment companies asset location, 121–124, 122f, 123f, 124f commercial paper holdings by, 14f, 15 creation of, 248

294

mutual funds (continued) demand for, 26, 28–30, 29f, 30f, 31f entering and leaving business, 16–19, 16f, 19f, 22, 22f ETF investments by, 14 history, 242–243 household ownership of, 11–12, 11f, 12f, 13f, 28–29, 30f, 86f, 87f, 93, 110, 112–117, 112f, 113f, 124, 124f IRA assets in, 12, 121–124, 151, 151f market cap equity, 223t, 224t by market capitalization, 223t, 224t mergers and liquidations, 16–17, 19, 19f net new cash flow, 30 number of, 22, 22f purchase sources, 59, 120, 122–123, 122f, 123f regulation of, 256–265 retirement savings role of, 159–161, 159f sponsors, 16–19, 16f, 17f, 19f, 247f, 248 trading, 59 variable annuities in, 11f, 12, 12f, 30f, 86f mutual fund shareholders. See also demographics; retirement account holders asset location, 121–124, 122f, 123f, 124f ETF ownership by, 73, 73f expenses, 93–94, 93f, 94f, 97 first fund purchase by, 118–119, 118f, 119f investment goals of, 113f, 133, 164 investor sentiment, 125, 125f, 128, 128f, 243 risk tolerance of, 35, 74, 75f, 125–127, 126f savings goals of, 28, 120, 120f taxable transactions by, 253 voting rights, 248 mutual fund trends. See also mutual fund expenses and fees assets, 26, 28, 29f, 30, 30f bond funds, 28, 29f, 38–43, 38f equity funds, 28, 29f, 34–37, 34f, 35f global economy and financial markets, 31–33 hybrid funds, 28, 29f, 43–44 index funds, 44–46, 45f, 46f, 47f, 95–97, 95f, 97f investor demand and, 26, 28–30, 29f, 30f, 31f money market funds, 28, 29f, 48–51, 48f, 49f, 50f, 51f, 52f net new cash flow, 26, 30, 31f

N

national municipal bond funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t natural resources sector funds, 225t, 226t net asset value (NAV), 59, 62, 244, 258–259, 278 net investment income (NII), 252

INDEX

net new cash flow, 30, 31f, 278 New York Stock Exchange closures, 259n10 no-load funds, 278 no-load share classes, 92, 100, 101, 104–106, 104f, 105f nonfinancial business assets, 14, 29, 49, 49f, 135 nonprofit organization assets, 29, 232t, 233t non–target date balanced funds, 144f, 145, 146f, 155, 156f non-U.S. fund advisers, 15, 15f

O

oil and gas prices, 32, 33 open-end investment companies, 244, 278. See also mutual fund entries operating expenses, 278 organizational structure of mutual funds, 245–249, 246f, 247f

P

passively managed funds, 46, 95, 244. See also index funds payroll deduction plans, 278 PCAOB (Public Company Accounting Oversight Board), 261 pension funds, 14, 49, 132, 136, 137f, 138, 138f. See also defined benefit plans Pension Protection Act (PPA), 43, 164 pooled investing, 40, 44, 46, 145, 146f, 147f, 148, 148f, 242–243, 278 portfolio, 279 portfolio leverage, 83, 83f, 85, 85f portfolio manager, 279 portfolio turnover rate, 37, 37f, 279 PPA (Pension Protection Act), 43, 164 precious metals sector funds, 225t, 226t preferred shares. See closed-end funds preferred stock, 279 preferred stock portfolio holdings, 198t, 199t prepayment risk, 279 pricing process, 258–259 primary market, 62, 63, 63f, 66, 67 prime money market funds, 15, 48f, 52–53, 52f, 53f, 206t, 207t, 208t, 212t, 244 principal (face value), 273 principal underwriters, 247, 247f, 249, 279 private-sector retirement plans. See defined benefit plans; defined contribution plans profit-sharing plans, 141f prohibited transactions, 262–263, 264 prospectuses, 256–257, 279 Public Company Accounting Oversight Board (PCAOB), 261

R

real estate investments, 73, 73f, 86, 86f real estate sector funds, 225t, 226t redeem, 279 redeemable securities, 244, 258–259 redemption price, 279 registered investment advisers. See advisers registered investment companies, 6, 7f, 8, 244, 279. See also mutual fund industry data registration statements, 257

INDEX

regulated investment companies (RICs), 250, 265, 280 regulation of investment companies core principles, 256–265 custody rules, 263 diversification standards, 265 ETFs, 60, 256 legislation, 243 leverage limits, 262–263 liquidity, 258–259 money market funds, 52–53, 244 mutual funds, 256–265 organizational structure, 245–249, 246f, 247f oversight and accountability, 259–261 prohibited transactions, 262–263, 264 taxation and, 250–255, 251f, 254f, 255f transparency and disclosure, 256–257 valuation, 258–259 repurchase agreements, 52, 52f, 54, 211t, 212t, 280 required minimum distribution (RMD), 157, 157f, 280 research publications, xi–xiv retail investors. See household financial assets; retirement account holders; individual investors retail money market funds, 50, 50f, 51f, 53, 207t, 208t, 233t, 244, 280 retail no-load share classes, 104f, 105f retirement, as savings goal, 28, 120, 120f, 121 retirement account holders demographics of, 139–140, 140f, 154–155, 156f investment goals of, 28, 113f, 120, 120f, 133, 134f retirement market assets DC plans, 124, 124f, 136–140, 136f, 139f, 140f, 159–160, 159f, 160f employer-sponsored retirement plans, 136–140, 137f, 138f, 139f, 160 401(k) plans, 12, 13f, 136f, 160, 160f 403(b) plans, 13f, 136f, 160, 160f 457 plans, 13f, 136f, 160, 160f IRAs, 124, 124f, 136–140, 136f, 137f, 139f, 140f, 159–160, 159f, 160f lifestyle funds, 161–163, 162f, 163f in mutual funds, 124, 124f, 159–162, 159f retirement resource pyramid and, 132–136, 133f, 135f, 136f target date funds, 161–163, 162f, 163f, 227t retirement plans. See also defined benefit plans; defined contribution plans; employer-sponsored retirement plans; individual retirement accounts assets, 124, 136–140, 138f, 139f, 140f as first mutual fund purchase, 118–119, 119f research publications, xii in resource pyramid, 132–136, 133f, 135f, 136f unfunded pension liabilities, 138, 138f return, 280 reverse repurchase agreements, 83, 85, 85f RICs (regulated investment companies), 250, 265, 280

295

risk, 280 risk/return tradeoff, 280 risk tolerance, 35, 74, 75f, 125–127, 126f, 280 RMD (required minimum distribution), 157, 157f, 280 rollover, 121, 153–154, 153f, 154f, 280 Roth 401(k) plan account, 280 Roth IRAs, 280 asset allocation, 155, 156f assets, 137f catch-up contributions, 152 characteristics, 150 distributions from, 157, 157f household accounts, 121, 124f, 139f, 152f, 152 investor demographics, 155, 156f mutual funds held in, 121, 124f, 160f near-retiree accounts, 136f opening contributions, 153, 153f rollovers into, 153, 153f target date and lifestyle fund assets, 162f

S

SAI (statement of additional information), 256–257, 282 sales charge (load), 90, 102–106, 103f, 104f, 105f, 281 Sarbanes-Oxley Act, 261 SAR-SEP IRAs (salary reduction simplified employee pensions), 281 assets, 137f characteristics, 150 as first mutual fund purchase, 119f household accounts, 122f, 123f, 124f, 139f, 152, 152f mutual fund assets in, 122f, 123f, 124f, 160f near-retiree accounts, 136f purchase sources, 122f, 123f target date and lifestyle fund assets, 162f savings goals of investors, 28, 113f, 120, 120f, 130, 133, 134f, 164–165, 165f, 167f savings incentive match plan for employees (SIMPLE) IRA. See SIMPLE IRA savings institutions, 122, 122f, 123f secondary market, 21, 59, 65f, 67f, 63, 63f, 64, 66–68, 68f, 245, 281 Section 529 plans, 30f, 124f, 164–165, 165f, 167f, 274 sector equity ETFs, 182t, 183t, 184t sector funds, 26, 96, 98, 99f, 225t, 226t, 281. See also multisector bond funds Securities Act of 1933, 60, 243, 248, 257n5 Securities and Exchange Commission (SEC). See also regulation of investment companies affiliated transaction prohibitions, 264 bond fund redemptions and, 39 custody rules, 263n disclosure requirements of, 252, 257 ETF regulation by, 58, 60 money market fund reforms by, 52–53 money market fund regulation by, 52f, 244 registration with, 248, 256n regulatory authority of, 243, 258, 261

296

Securities and Exchange Commission (continued) 12b-1 fees, 90, 96, 100 valuation and liquidity requirements, 258 Securities Exchange Act of 1934, 243, 249 securitization, 281 security, 281 selling short, 262–263 semiannual reports, 257, 281 senior securities, 262–263 separate account, 281 SEP IRAs (simplified employee pension plans), 281 assets, 137f characteristics, 150 as first mutual fund purchase, 119f household accounts, 124f, 139f, 152, 152f mutual fund assets in, 122f, 160f near-retiree accounts, 136f purchase sources, 122f, 123f target date and lifestyle fund assets, 162f series funds, 281 series trusts, 18 share, 281 share classes, 92, 92f, 100–101, 104, 104f, 105f, 172t, 178t, 179t, 206t, 281 shareholders, 282. See also mutual fund shareholders; retirement account holders shareholder sentiment, 35, 125, 125f short positions, 262–263 short-term capital gains, 252, 255f short-term funds. See money market funds short-term interest rates, 50 Silent Generation, 114–115, 114f, 115f, 118, 118f SIMPLE (savings incentive match plan for employees) IRAs, 282 assets, 137f characteristics, 150 as first mutual fund purchase, 119f household accounts, 122f, 123f, 124f, 139f, 152, 152f mutual fund assets in, 122f, 123f, 124f, 160f near-retiree accounts, 136f purchase sources, 122f, 123f target date and lifestyle fund assets, 162f simplified employee pension plans. See SEP IRAs small-cap equity ETFs, 71f small-cap equity funds, 33, 96, 98 small-cap mutual funds, 223t, 224t Social Security, 132–135, 133f, 135f S&P 500 index, 32, 35, 36, 44, 45f, 58, 282 S&P 500 index funds, 218t, 219t, 220t, 221t sponsors, 16–19, 16f, 17f, 19f, 247f, 248, 282 stable value funds, 145, 282 state government employee retirement plans, 136, 137f, 138, 138f, 141 statement of additional information (SAI), 256–257, 282 state municipal bond funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t

INDEX

state municipal bond funds (continued) liquidity, 187t net new cash flow, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t stock, 282 common, 198t, 199t, 202t, 203t, 204t, 205t company, 145, 146f, 147f directly held, 11, 12f, 73, 73f, 86f, 86, 87f as investment company asset, 14, 14f IRA investments in, 151, 151f margin purchases of, 262 as portfolio holdings, 198t, 199t preferred, 198t, 199t short positions, 262–263 stock bonus plans, 141f stock funds. See equity funds stock market performance equity fund correlation to, 34–37, 34f ETF demand and, 70 international, 8, 34, 34f, 36 international indexes, 33, 44 investment company assets and, 8 mutual fund trends and, 31, 32–33, 34–36, 34f shareholder risk tolerance and, 35, 125 U.S. stock indexes, 32–33, 35, 36, 44 volatility and market risk, 35 structural leverage, 83–84, 83f, 84f summary portfolio schedule, 257n6 summary prospectus, 282

T

target date fund CITs, 46 target date funds, 282 by account type, 162f asset allocation strategies, 36, 43 assets, total net, 227t bond fund flows and, 43 characteristics, 43, 148–149, 161–163 in DC plans, 43, 162f, 163, 163f exchange redemptions, 228t exchange sales, 228t expenses and fees, 94, 94f, 99f in 401(k) plans, 143, 144f, 145, 146f, 148–149, 148f in IRAs, 155, 162f net new cash flow, 43, 227t, 228t new sales, 228t number of funds, 227t number of share classes, 227t redemptions, 228t retirement assets in, 43, 155, 156f, 161–163, 162f, 163f target risk (lifestyle) funds. See lifestyle funds taxable bond funds, 99f, 174t, 176t, 178t taxable closed-end bond funds, 80f, 81f, 180t, 181t taxable government money market funds, 206t, 207t, 208t, 211t

INDEX

taxable money market funds asset composition, 211t, 212t assets, total net, 174t, 175t, 176t, 206t, 207t, 233t dividends paid and reinvested, 210t Fed reverse repo facility for, 54 institutional, 207t, 208t, 233t net new cash flow, 51f, 208t number of funds, 177t, 206t number of share classes, 178t, 179t, 206t retail, 51f, 207t, 208t taxable prime money market funds, 206t, 207t, 208t, 212t tax-deferred mutual funds, 251, 251f, 254–255, 254f, 255f tax-exempt bond funds, 253 tax-exempt money market funds assets, total net, 174t, 175t, 176t, 206t, 207t dividend distributions, 253 dividends paid and reinvested, 210t institutional, 207t, 208t net new cash flow, 48f, 208t number of funds, 177t, 206t number of share classes, 178t, 179t, 206t retail, 207t, 208t tax-exempt mutual funds, 15, 251, 251f, 253, 254, 254f tax features of mutual funds assets by tax status, 251, 251f capital gain or loss, 253 cost basis, 253 distribution types, 252, 254–255, 254f, 255f diversification standards, 265 exchanges of shares, 253 net investment income tax, 252 non-U.S. investors, 252 RIC qualification, 250 taxable transactions, 253, 254f, 255f tax-exempt funds, 253 Taxpayer Relief Act of 1997, 152 Taxpayer Relief Act of 2012, 164 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, 164 T-bills (Treasury bills), 50, 211t, 212t, 283 technology/telecom sector funds, 225t, 226t tender offer, 283 tender option bonds, 83, 85, 85f Third Avenue Management LLC, 39 thrift deposits, 151f thrifts, 15, 15f Thrift Savings Plans (TSPs), 137f, 141, 141f total net assets, 283. See also mutual fund industry data; specific classification, such as closed-end funds total return, 283 total return equity funds assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 192t new sales, 193t

297

total return equity funds (continued) number of funds, 177t number of share classes, 179t redemptions, 195t traditional IRAs, 283. See also individual retirement accounts transfer agents, 247, 247f, 249, 283 transparency, 65–66, 256–257 Treasury bills, 50, 211t, 212t, 283 Treasury bonds, 32 Treasury inflation-protected mutual funds, 222t Treasury securities, 14f, 15, 52, 52f, 211t, 212t, 284 trends. See mutual fund trends trustees, 246, 283 turnover rate, 37, 37f 12b-1 fees, 90, 96, 100, 101, 103, 283

U

underwriters, 247, 247f, 249, 283 unit investment trusts (UITs), 283 assets, total net, 9f, 21f, 185t characteristics, 20–21, 245 custody rules, 263n diversification standards, 265 household ownership of, 11f new deposits, 10, 185t number of, 21f, 22, 22f, 185t regulation of, 256n, 263n U.S. corporate equity, 14f U.S. dollar performance, 8, 32, 33, 36, 39 U.S. economic climate, 18–19, 26, 28, 30–33, 44, 140 U.S. government agency issues, 14f, 15, 52, 52f, 211t, 212t U.S. government bond funds. See government bond funds U.S. government bond portfolio holdings, 198t, 199t U.S. government employee retirement assets, 135–136, 136f, 137f, 138, 138f, 141 U.S. Labor Department, 150 U.S. mutual fund assets, 6, 7f, 10f, 26, 28, 29f, 30f. See also mutual fund industry data U.S. retirement market assets. See retirement market assets U.S. retirement system, 132–140, 133f, 135f, 136f, 137f, 139f, 140f U.S. stock market. See stock market performance U.S. Treasury securities, 14f, 15, 52, 52f, 211t, 212t, 284 utilities sector funds, 225t, 226t

V

valuation of funds, 258–259 value funds, 99f, 223t, 224t variable annuities, 284 assets, total net, 105f in ETF-owning households, 73, 73f holdings by tax status, 251 household ownership of, 11f, 12, 12f, 30f, 73, 73f, 86, 86f as IRA assets, 151f net new cash flow, 104f retirement assets in, 124f, 137f

298

variable annuity mutual funds assets, total net, 229t equity, 229t, 230t exchange redemptions, 230t exchange sales, 230t hybrid and bond, 229t, 230t money market, 229t, 230t net new cash flow, 229t, 230t new sales, 230t number of funds, 229t redemptions, 230t VIX (Chicago Board Options Exchange Volatility Index), 35

W

withdrawal plans, 284 world bond funds alternative strategies, 213t assets, total net, 175t exchange redemptions, 196t exchange sales, 194t liquidity, 187t net new cash flow, 39, 192t new sales, 193t number of funds, 177t number of share classes, 179t redemptions, 195t world equity funds alternative strategies, 213t assets, total net, 8, 10f, 27, 174t, 175t DC plan assets in, 234t demand for, 36 exchange redemptions, 196t exchange sales, 194t expense ratios, 98, 99f IRA assets held in, 235t liquidity, 187t net new cash flow, 34, 34f, 36, 192t new sales, 193t number of funds, 176t, 177t number of share classes, 178t, 179t redemptions, 195t retirement assets in, 160, 160f world index equity funds, 44, 45f, 218t, 219t, 220t, 221t worldwide mutual fund assets, 10f, 236–237t, 238–239t, 240–241t

Y

yield, 284

INDEX

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