The mutual fund industry has been very profitable. In 1992 the 10 publicly traded mutual fund management companies averaged a 23% return on equity. But remember, these companies are well-established and large. In fact, only four families of bank-sponsored funds are larger than the smallest of these 10 publicly traded management companies.

And mutual fund industry profitability is highly dependent on economies of scale. The largest of these publicly traded companies posted a 31% return on equity; the smallest, just 17%.

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