Number of US households that own mutual funds jumps

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The number of US households invested in mutual funds has grown, even as long-term mutual funds experienced outflows in 2023, according to the Investment Company Institute’s 2024 Investment Company Factbook.

In total, 68.7mn households, or just over half of US households, were invested in mutual funds in 2023, up from 58.7mn households in 2020.

Those households had $18.6tn invested in long-term mutual funds and $3.9tn in money market funds, which accounted for 88 per cent of mutual fund total net assets, while the remainder came from institutional investors, which had $2tn invested in money market funds and $1tn invested in long-term mutual funds.

Although long-term mutual funds experienced $665bn of outflows in 2023, this was offset by $957bn of net inflows to money market funds, according to ICI data.

This article was previously published by Ignites, a title owned by the FT Group.

As a result, mutual funds experienced net inflows of $292bn in 2023, bouncing back from net outflows of $1.1tn in 2022.

The data also showed differences in the type of exposure sought by different generations, with a higher percentage of younger investors exposed to cryptocurrencies, while a higher percentage of older investors held mutual fund exposure.

Actively managed mutual funds have declined in popularity in recent years. The proportion of invested assets in active mutual funds dropped from 60 per cent to 52 per cent in just three years, while interest in index-based exchange traded funds and index-based mutual funds has risen, ultimately amounting to almost half of the $33.9tn of total net assets on the market.

ICI’s report also detailed the differences in investment strategy between full-service brokers and fee-based advisers: brokers invested more in mutual funds and variable annuities, whereas advisers focused more on ETFs.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com