Where does the mutual fund industry turn for asset growth after a virtually unbeatable year?

Washington.

At least that's where key officials of the Investment Company Institute, the fund industry's leading trade group, have set their sights.

During a recent luncheon presentation in New York on the industry's outlook, the institute's top officials outlined proposals that would help them gain more of Americans' savings dollars.

The institute continues to endorse the raising of contribution ceilings on individual retirement accounts and expanding who is eligible to open them.

It has also engaged consultants to look hard at partial privatization of Social Security, which could increase private investment in funds.

"If we don't do something to change the way that (baby boomers) and the U.S. government are providing for their retirement ... two-thirds of Americans will retire and have to reduce their standard of living significantly," said Jon S. Fossel, chairman of both the institute and of Oppenheimer Management Co. "That's the bottom line."

For the near term, trade group is counting on regulatory relief to help set the stage for fund growth.

The group is pushing for regulatory changes that would aid mutual fund investors while reducing burdens on fund companies, said Matthew P. Fink, president of the institute.

Simplification of fund prospectuses remains a top priority but one that has been largely thwarted by state regulators, he said.

The institute supports legislation that would reserve to the federal government regulation of fund operations and prospectuses while letting state regulators concentrate on investor education and the policing of sales practices.

Although about 40 states largely limit their activities to collecting mutual fund registration fees and enforcing anti-fraud statutes, eight or 10 activist states, among them Missouri and Vermont, add their own requirements to those of the Securities and Exchange Commission, Mr. Fink said.

"It's been a helluva mess, mucking up prospectuses and stopping SEC innovation," he said.

During the luncheon, Mr. Fossel spent plenty of time discussing issues related to retirement savings.

This year, as the first of 77 million baby boomers hit 50, the central question facing the fund industry is how that huge population group will finance its retirement, Mr. Fossel said.

Pointing to other prominent national crises, such as those related to health care, crime, and education, he said, "Wait till we get to the baby- boomers-beginning-to-retire crisis."

By Mr. Fossel's estimate, the Social Security System's pension liability is $11 trillion for people paying in today, while the offsetting assets total $450 billion.

"If this was a corporate pension plan and we were here talking to ERISA regulators, they would say you're 96% unfunded," Mr. Fossel declared, referring to federal pension fund overseers.

Closing that gap depends on decisions by the federal government. Among the alternatives are reducing benefits, raising taxes, or enhancing returns on the money that's being paid in, he said.

The fund industry could help on the third option, Mr. Fossel said.

Already, one-third of all mutual fund assets are earmarked for retirement, according to the institute's data. That could soar if legislation it supports became law.

One such measure would let a portion of Social Security payroll taxes flow into private investment pools.

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