Who would ever have thought that mutual funds would have to fight to stay relevant in the marketplace?
There are major cracks in the US mutual fund business. Revenues are roughly what they were in 2007. In 2000, mutual funds accounted for 80% of the fund business; now, they are on 58% of it.
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ETFs are largely the detractors. Currently, most are not actively managed and they have lower fees so investors get decent returns at lower costs.
Alternative asset managers and private equity firms are also taking investor dollars away. One alternative for mutual funds is to get involved in buyouts.
Or they could consider merging with private equity funds. Mutual funds would provide new pools of cash to the private equity funds who are having difficulty meeting their historically large returns.
It also could give investors the opportunity to partner
with the founder of a company in a buyout—something formerly reserved only for the significantly wealthy.
Industry dynamics are undergoing significant change. It will be interesting to see how the mutual fund industry evolves from here.