2004 Mutual Fund Growth Seen in US, Asia and UK

Riding high on fourth-quarter gains, the US market – as measured by open-ended assets – rose 9.9% on the year, bringing the total assets invested in such markets to above $7 trillion for only the second time in history.   Stock funds rose 11.48% on the year, according to the report, while sector equity funds soared 16.02%. Real estate funds were the year’s biggest winner, posting gains of 32.05% on average.

While US bond funds saw modest growth, the biggest winners in this area were emerging market debt funds, which posted an average return of 12.33% on the year, according to Lipper. Exchange-traded funds also saw much growth, pulling in large amounts of cash, according to the company. Inflows on the year were $57 billion, far above the 2003 figure of $15.8 billion.

Looking forward, Lipper is projecting that 2005 will look much like 2004.

As for other markets, Asian funds saw similar gains to those seen in the US. Despite political and physical events leaving the region on shaky ground, the stock markets performed well according to Lipper. Overall, equity funds did better than bond funds, with only China and Thailand bucking this trend.

Growth for 2005 is expected to be tempered, due to further oil spikes and the US current deficit, according to Lipper.

In the UK, 2004 brought with it a 12.84% gain in the equity markets. Citing a calm conclusion of the US election, a fall in oil prices and a peak in UK interest rates, Lipper concluded that a clear recovery was seen in the second half of the year.

As for Europe, the 2004 markets “did not emulate the pattern of economic growth shown by the Asian and US economies,” according to a Lipper executive summary, with average GDP growth lower than its overseas counterparts. However, most mutual funds gained ground. The report indicates that there were large inflows seen into the fund industry as investors left the US market.

Breaking it down by country, Germany say an outflow from fixed income and money markets into equity and balanced funds, while France saw big gains in Eastern European funds. Spain’s traditionally conservative market saw a concentration in its “global” domestic category, as well as short-term bonds and guaranteed funds. For 2005, Lipper does not expect to see a swift recovery for the European region as a whole.

Lipper’s survey – Global Themes in the Mutual Fund Industry – 2004: A Review of the Global Pooled Investment Management Industry – is a 410-page report available for a fee from the company.