Mutual Fund Industry

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Mutual Fund Industry

Mutual Fund Industry

The mutual fund industry was the fastest growing segment of the financial services sector since the 1990s and continues evolving to lead the financial services industry today. Assets have been increasing steadily from $25 billion in December 1990 to an outstanding amount of $704 billion AUM as at September 2007.

For almost every year since 1990, the majority of exponential asset growth has been due to new sales of this investment product that has become increasingly popular. The share of assets held in foreign funds has also increased substantially over the past 10 years. In 1990 foreign funds accounted for 17 per cent of total assets; by 2007 they made up fully 40 per cent of fund assets. In 2001 911 had a significant negative impact on North American Markets, which has since recovered only recently. Cancellation of the 30% Maximum Foreign Contribution Rules were also responsible for this growing trend of Canadian's wanting more diversification and also looking for better overall returns.

There are 85 mutual fund management companies operating in Canada. The industry is moderately concentrated, with the top 10 companies accounting for 77 per cent of all assets. The industry also includes 140 dealer firms involved in the sale of mutual funds. In total, the industry employs about 100,000 mutual fund representatives, advisors and stockbrokers. The main types of mutual funds are money market funds, bond funds, equity funds, dividend funds, mortgage funds and real estate funds.

In 2007 there are currently 100 investment fund companies with their 1,842 funds in 2006 growing to 1,962 total independent mutual funds available in Canada representing over 50 million unit holder accounts. According to the CIFSC there are 10 Asset Classes and more than 50 fund categories not including bank funds, segregated funds, labour-sponsored funds, hedge funds, closed-end funds, pooled funds, trust funds, off-shore funds and exchange traded funds.

The industry can generally be divided into the manufacturers of funds and the distributors, although the banks, credit unions and caisses populaires are involved in both sides of the industry. The Advisor Channel is more highly coveted than at any other time in history, the industry often forgets that all financial products are sold, there is a
refreshing trend by market participants to recognize and respect independent financial advisors for there ability attract and retain important long-term financial relationships. Advisors partner with more affluent clients that prefer overall financial advice rather than the standard, apparent and dismal approach of mass marketing by the big banks and large financial institutions.A Mutual Fund Company that is involved solely in the manufacture of mutual funds tend to distribute their funds through mutual fund representatives, investment advisors, financial planners, mutual fund dealers and life insurance agents, while the banks, credit unions and their Quebec counter part caisses populaires distribute their fund products through their retail branches as well as via independent advisors and brokers.

Mutual Fund Companies and distributors obtain revenue from three main categories of fees: management fees (to pay for the management of the fund), sales fees (to pay for buying and selling the fund units) and special fees (for specific administrative costs). The mutual fund industry is governed by provincial and territorial legislation regulating the underwriting, distribution and sale of securities. There is also extensive self-regulation by the Investment Dealers Association of Canada, the Mutual Fund Dealers Association of Canada and the stock exchanges.


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