Investors will continue to pour money into funds, especially into target date funds and ETFs, according to a report on mutual funds from Tiburon Strategic Advisors.
Tiburon’s universe of mutual funds includes open-end mutual funds, exchange-traded funds, closed-end mutual funds, and unit investment trusts.
Overall, Tiburon sees mutual fund net flows increasing to $160 billion in 2012, bringing mutual fund assets to more than $16 trillion. By comparison, during the last stock market upswing, mutual fund net flows were $100 billion in 2006, bringing assets up to $10.4 trillion that year.
A great deal of past, present and future growth can be attributed to target date funds, according to Tiburon. Target date mutual funds now have $270 billion in assets under management, up from just $5 billion in 1998. Their assets have grown by 50% since 2007. Tiburon reports that almost one-quarter of retirement plan participants have assets in a single target date mutual fund.
Going forward, Tiburon predicts the number of mutual fund companies offering target date mutual funds will increase from 30 to 42 by 2013 while the number of target date mutual funds will increase from 300 to 420 by next year. With this expanded market presence, target date mutual fund net flows are seen increasing to $60 billion in 2013, from a current level of $40 billion.
ETFs also will continue to grow, according to Tiburon. From $1 billion in total assets in 1993, ETF assets now top $1 trillion–and they’re projected to reach $3 trillion by 2017. While ETFs have grown, closed-end mutual funds have lost assets: such funds peaked in 2007, with $312 billion under management, but assets in closed-end mutual funds have dropped by almost 25% since then, to $239 billion in assets.