Mutual fund sales will grow at a slower pace than other investment products in the next five years, according to a study released Wednesday, but fund sales through banks are expected to rise faster than in other channels.
Boston's Financial Research Corp. projects mutual fund sales growth of 2% annually, to reach $340 billion by 2012. Starting from much smaller asset bases, other products' sales will grow at eight times that rate, according to the study "Mutual Fund Market Sizing 2007-2012: An Analysis of Channels, Sales, and Assets."
"Mutual funds are facing increasing competition from [exchange-traded fund]s, managed accounts, and hedge funds, all of which will see double-digit annual growth in net sales," said Ian Rubin, the study's lead author and a senior vice president of retail investment markets research.
Companies can expect continued increases in gross sales through intermediary channels, he said. This category will contribute 61% of sales by 2012, up from 50% in 1999.
In the next five years, sales of mutual funds through banks are expected to rise "quickly" by comparison with other channels, according to the study. "We forecast banks will experience strong growth in both net sales and assets," Mr. Rubin said. "This growth will be driven by several changes in the banking industry, including the wave of mergers and acquisitions, the use of platform programs to service the lower end of the investor wealth spectrum, and the move toward broader open architecture to improve asset and fee generation."
