--- DECEMBER 2, 2005 ---

*****************************************************************************

Tiburon is pleased to release its twentieth research report titled An Initial Overview of the Mutual Funds Industry. This new report provides an initial understanding of the mutual funds industry by addressing the evolution of the mutual funds business, mutual fund company rankings, and an overview of mutual funds markets & distribution channels. The report also outlines the seven key mutual funds industry debates, and profiles over 400 mutual fund companies and mutual fund service providers. This release inlcudes key highlights from the report

*******************************************************************************

Context Setting

Tiburon Strategic Advisors, a market research & strategy consulting firm serving the brokerage and investment management industry, recently released a new research report on the mutual funds industry. As many know, the mutual funds industry was founded in 1924 and has seen nearly uninterrupted subsequent asset growth. Today there are nearly 8,000 mutual funds, 5% less than the peak in 2002, $8.5 trillion. Although percentage growth has slowed and the household penetration has peaked at ~50%, asset flows still lead all other financial products.

Please click the image above to view the table of contents for Tiburon's An Initial Overview of the Mutual Funds Industry research report.

At the same time, during the difficult years since 2001, the largest mutual fund companies have been taking increasing market share. The question is how are they doing it? Are the top mutual fund companies growing because they are the biggest and profit from increased efficiency, market clout, and economies of scale? Or are they getting bigger because they offer value to consumers?

Within this conext, Tiburon's new research report seeks to provide an initial overview that will assist readers in understanding the mutual funds industry. It is Tiburon's first effort at putting its views of the impact of these events into a single report.

More Information

Key Highlights

  • Nearly 50% of US households own mutual funds, including over 80% of households earning more than $100,000
  • The number of equity mutual funds more than quadrupled in the 1990s and there are now 4,550 equity mutual funds
  • Over 2,000 mutual funds were liquidated or merged into other mutual funds during 2002 and 2003
  • The share of net sales captured by the top five mutual fund companies has grown from ~40% ten years ago to ~90% today
  • Despite the volatile stock market and low interest rates, assets in the mutual funds industry have not declined; however, assets have been redistributed to the top three mutual fund companies, Fidelity Investments, Vanguard, and American Funds
  • American Funds, the smallest of the top three mutual fund companies, has more than twice the assets of its next nearest competitor, Franklin Templeton
  • Affluent investors have doubled the share of their assets they have allotted to mutual funds over the last two years
  • Nearly 90% of investor assets are in actively managed mutual funds
  • Mutual funds that remain true to their style descriptions outperform funds that don’t, and are generally less risky, as well
  • No load mutual funds outperform load funds by an average of 154 basis points after taxes
  • Over 75% of new fund flows go to mutual funds with expenses ratios of one or lower
  • On average, trading costs only account for 44% of the expense ratios published in mutual fund prospectuses
  • Less than 5% of mutual funds charge performance based fees
  • Over 80% of the assets in performance fee funds are in Fidelity and Vanguard funds
  • Together, Fidelity Investments and Charles Schwab & Company control over half of all mutual fund supermarket assets
  • 56% of high net worth investors use full-service brokers
  • Two-thirds of independent reps put more than half of their assets with one mutual fund company
  • Three-quarters of fee only financial advisers use mutual funds
  • Over two-thirds of mutual fund industry assets are in tax deferred retirement accounts like 401(k)s and IRAs
  • The net flows of Vanguard, Fidelity, and American Funds rose 20% during the mutual fund scandals; they were not implicated
  • Tiburon offers a series of projections in the report:
    • Although merger & acquisition activity will continue unabated, the overall number of mutual fund companies will remain the same
    • The cost of investment products to shareholders will decline
    • Strong distribution networks are crucial to future success
    • Mutual fund companies will distinguish themselves with advice

*******************************************************************************

Tiburon Strategic Advisors

Tiburon Strategic Advisors, based in Tiburon, CA, was formed in 1998 to offer market research & strategy consulting services to all types of financial institutions and investment managers:

  • The firm has served over 300 corporate clients and completed over 800 projects since its founding, and today, its knowledge base includes mutual fund distribution, separately managed account programs, alternative investments, wealth management, insurance products, banking services, the fee-only financial advisor market, the CPA firm market, the family office market, and various international markets.
  • Tiburon expanded its workforce by seven in 2004-2005. Five new research managers will develop proprietary research content for Tiburon research reports and client projects and three new marketing managers will enhance the firm's web site, weekly research releases program, and the firm's relationships with media representatives, conference planners, and its clients & executive program members.
  • Tiburon has built three executive programs (CEOs-in-Residence, Financial Advisor Roundtable, and Consulting Fellows) in an effort to bring the experiences of additional senior level industry executives to Tiburon clients. Feel free to contact any of the members of Tiburon’s executive programs directly or ask that they be included in any ongoing Tiburon project.
  • Tiburon holds a series of CEO Summits semi-annually for its clients and prospective clients. Attendance is by invitation only and is limited to 75 senior industry executives. Visit the CEO Summits section of Tiburon's web site for details on current and past CEO Summits, including attendee lists, meeting agendas, and highlights. Please contact Tiburon’s Managing Principal Chip Roame at CRoame@TiburonAdvisors.Com or (415) 789-2541 if you have an interest in attending a future Tiburon CEO Summit.
  • Tiburon has published twenty ~300 page research reports, which offer detailed analyses of growing business segments; each is available for $2,500; these reports can be ordered by contacting Sarah Sage at SSage@TiburonAdvisors.Com or (415) 789-2540.
  • Tiburon’s weekly research releases, like this one, are emailed for free to interested industry executives, media representatives, conference planners, and individual financial advisors. Over 38,000 industry executives now receive these releases. Feel free to sign up to receive future research releases at Tiburon’s web site (www.TiburonAdvisors.Com) if this release was passed to you by a colleague and you would like to receive them directly in the future.
  • Tiburon has built an extensive 215,000+ person database of industry executives, media representatives, conference planners, and individual financial advisors. Tiburon leverages this database to conduct interviews of leading executives and advisors.
  • Tiburon offers thirteen online business benchmarking tools that are available to all types of financial advisors in an effort to help them benchmark their business practices and build more successful businesses. The sites include www.BrokerBestPractice.Com for wirehouse & regional brokers, www.FABestPractices.Com for fee-only financial advisors, www.IndependentRepBestPractices.Com for independent reps, and www.PrivateBankerBestPractices.Com for private bankers. Over 4,000 advisors have used these tools. By completing one of the online surveys, financial advisors can access a FREE copy of the relevant comprehensive Tiburon research report, which summarizes and analyzes the collective results.

    • *******************************************************************************