Mutual funds accounted for 17% of the U.S. retirement assets last year, up a percentage point from the previous year, according to the Investment Company Institute.

Funds assets rose 28% in 1997 and by year's end accounted for $1.6 trillion of the $9.4 trillion U.S. retirement market, the mutual fund trade group said.

Investment performance, including reinvested dividends, capital gains and asset appreciation, accounted for 70% of the increase, with new investments making up the rest.

Mutual funds' share of the retirement market has grown steadily this decade, as individuals and businesses poured money into individual retirement accounts and defined contribution plans.

Most of that investment has been into equity mutual funds, the institute said.

A big factor in mutual funds' growth through IRAs was the creation of the "Simple IRA" program, which for the first time last year allowed small businesses to fund employee IRAs up to $12,000.

In 1997, 1.3 million Simple IRA accounts investing in mutual funds had been opened. The IRA market overall has grown to $1.9 trillion of assets from an estimated $37 billion in 1981.

Mutual funds accounted for 42% of 401(k) assets last year or $444 billion. That's up from 37% the previous year and about 9% in 1990.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.