Fearless predictions were flying last week as mutual fund industry executives gathered in Washington for the Investment Company Institute's general membership meeting.
Low interest rates have helped push fund assets past the $1.7 trillion mark. Just how high could assets climb by the end of the decade?
In a slow-growing economy, fund assets could reach the $3 trillion mark by the year 2000, said Charles B. Johnson, president of the Franklin Group of Funds, San Mateo, Calif. If the economy picks up steam, assets could grow to as much as $5 trillion, he said during a panel discussion.
Doubts About Predictions
Other executives expressed doubts. "If we want to get to $5 trillion or $6 trillion, it's Katy, bar the doors," said James S. Riepe, managing director of T. Rowe Price Associates, Boston.
Mutual fund assets would have to grow at a compound annual rate of 8.5% to reach the $3 trillion mark, and 14% to reach $4 trillion, Mr. Riepe noted.
To exceed that level of growth, mutual funds will either have to grab up a huge amount of market share or turn in extraordinary investment results, he added.
On the convention's opening day, about 250 people packed a briefing room for a special session on the institute's first survey of banks in the mutual fund business. The survey found that banks accounted for 33% of all money market mutual fund sales and 14% of all stock and bond fund sales during the first half of 1992.
Delivering a postmortem on the survey, Stephen E. Gibson, managing director of retail marketing for Putnam Financial Services, said he thinks the bank side of the business will continue to grow steadily. But because they lack nationwide outlets, banks won't be able to rack up dramatic sales increases.
The survey showed that more than half of banks' mutual fund sales volume was in fixed-income funds.
"There are going to be a lot of unhappy people lined up in the banks if that kind of product mix continues," Mr. Gibson said, because higher interest rates would reduce the value of bond portfolios. A big challenge for banks is to move investors into equity funds before rates rise, he added.
The survey also showed that two-thirds of the mutual funds sold by banks are managed by outside companies.
"If the banks have their way, that will change," Mr. Gibson said. "I haven't spoken to a single banker who is not intent to pushing proprietary product."
Though bankers were out in force at the institute's conference it wasn't so long ago that they were rare birds indeed.
One banker recounted an episode two years ago, when institute staffers yanked him for a closed-door breakfast meeting because they were convinced he couldn't possibly have been a member. In fact, he was.
"It used to be awfully lonely around here," the banker said.