This is part two of a two-part article was excerpted from Callahan's 2001 Directory of Mutual Fund Service Providers. Part 1 appeared on CreditUnions.com last week.
Mutual fund companies responded to the demand for mutual funds by increasing the number of funds available by 168 percent from 2,900 to almost 8,000. The variety of funds available expanded as well to include specialty, sector, international and funds of funds. In particular, mutual funds offering foreign stock resonated with select investors who wished to diversify their portfolios to include overseas stocks.
In the 1990s, the means through which mutual funds could be purchased evolved to meet consumer demand. Mutual fund companies broadened the distribution channels to include third parties and intermediaries as well as more traditional direct sales. Additionally, funds that had been marketed directly to the investor were increasingly sold through third parties and intermediaries.
The Typical Mutual Fund Shareholder:
- Middle aged, married and college educated; heaviest concentration 35-44 years old
- 82% employed full or part time; only 17% retired
- is of moderate financial means; median household income of $55,000
- has $25,000 invested in mutual funds; total financial assests of $80,000
- has long-term mutual fund goals
| Source: Investment Company institute, 2000 Mutual Fund Fact Book
One additional factor contributing to the shift toward mutual funds was the declining purchase cost of the funds. ICI defines purchase cost as total shareholder cost, or the average cost of share purchases incurred by buyers of funds in a given year. This decline in price ran across the fund spectrum. Shareholders enjoyed a 25 percent decrease inequity funds, 36 percent decrease in bond funds, and 21 percent decrease in money funds.
Mutual Funds at the Decade's End
Almost half of all households in the United States owned mutual funds by the end of 2000. These 48 million households (83 million individual shareholders) owned 90 percent of all mutual funds. A strong economy coupled with high stock returns, stable inflation, low interest rates and the expansion of retirement plans and accounts made financial investment attractive to American consumers. Households increasingly moved assets from real estate and other tangible holdings to investments. Amidst this shift, mutual funds grew in importance, steadily gaining in share of total financial assets.
The advantage of having a program is obvious to some credit unions. A mutual fund program ''attracts members, retains members [and] provides income,'' is how one $208 million credit union in Pennsylvania expressed it. To others, the competitive advantage of a mutual fund program is a strong advantage in helping a credit union become a member's preferred financial institution.
Perhaps because of low credit union participation, very little data exists on credit unions' mutual fund programs. Federal reports and industry analyses of mutual funds rarely identify the various institutions that offer these funds. The following research study by Callahan and Associates under tab 2 on mutual fund programs in credit unions attempts to gather this data. The report looks at the organizational structures of mutual fund programs, measurements for evaluating the program, and satisfaction with third party providers. Lastly, the report examines where mutual fund programs are headed. As a $457 million Florida credit union stated, ''This is where our future growth will be.''