Less than 1% of the approximately 65,000 mutual funds sold around the world controlled 45% of the global fund industry’s $23.0 trillion in assets as of 30 June 2016. New research from Propinquity, a specialist consultancy to investment management companies worldwide, offers insight into these giants. What’s more, the small subset of 634 ‘mega funds’, defined as those with total net assets of $5 billion or more, have been responsible for nearly half (48.1%) of the industry’s global growth since 2007.
446 of the 634 worldwide mega funds are sold in the U.S. This represents 82.9% of global mega fund assets ($8.5 out of $10.2 trillion). 68.7% of total U.S. mutual fund assets are in mega funds – the U.S. has never been this hyper-concentrated. This concentration is in sharp contrast with European domiciled funds, which have 16.9% of assets in mega funds.
In 2007, 11.6% of mega fund assets were passively managed. As of Q2 2016, passive funds make up 25.8% of global mega fund assets ($2.6 out of $10.2 trillion). By contrast, passive funds make up only 15.1% ($3.5 out of $23.0 trillion) of the broader worldwide mutual fund universe.
As of Q2 2016, the average passive mega fund has $40.1 billion in assets while its active counterpart has $13.4 billion – a third as large. The greatest economics of scale are found in passive strategies, while fees are slim, barriers to entry are high link.