The United States has a very large mutual fund market. There are literally hundreds of different fund families and thousands of individual funds available, and all of them are vying for your investment dollars.
There are almost as many mutual funds as there are stocks traded on the NYSE Arca and NASDAQ combined. In fact, as of February 2021, there are approximately 8,000 mutual funds in the United States, managing approximately $21 trillion dollars.
Faced by this daunting array of options, investors need to find a way to separate the wheat from the chaff. One simple way to accomplish this is to focus on the biggest mutual fund companies. After all, mutual funds that serve their shareholders the best tend to attract more assets, so size seems like a reasonable proxy for success, or at least a reasonable starting point.
The process is easy: List all of the mutual funds for any given family, add up their combined total assets under management, or AUM, and see which companies investors have collectively poured in the most money. Since the relatively free market in the U.S. is supposed to reward success and punish failure, the biggest fund families ought to be the ones that have served investors the best over time.
A subtle yet important distinction must be determined before the list can be made, and that is the difference between mutual fund providers and mutual fund families.
Fund Families vs. Fund Providers
A subtle yet important distinction must be determined before the list can be made, and that is the difference between mutual fund providers and mutual fund families. A mutual fund family is like a brand name umbrella. Most investors encounter mutual funds through their family names, such as the first words in titles including Vanguard International Growth Fund or Templeton Global Bond Fund. If you organize the list by fund families, you are going to get the initial title to match for every mutual fund in a group.
The mutual fund provider is the larger financial institution that owns the fund family. For example, Wells Fargo, or the fund provider, owns the Wells Fargo Advantage Funds, or the fund family. The tricky issue with fund providers is they often handle more than just mutual funds, and they may have more than one fund family brand out in the market. As such, it is advantageous to focus on fund families instead of fund providers.
BlackRock Funds top the list in terms of assets held by a single fund family, followed by other familiar names such as Vanguard, Charles Schwab, State Street Global Advisors, and Fidelity Investments.
Fast Fact
BlackRock has approximately $9 trillion in assets under management as of December 2020; the Vanguard Group manages approximately $7.2 trillion as of January 2021, while Charles Schwab manages $6.7 trillion, which includes TD Ameritrade assets, as of December 2020.
1. BlackRock Funds (iShares)
The New York City-based BlackRock, Inc., which carries the title iShares instead of BlackRock, released its first mutual funds in 1998 in conjunction with PNC Financial Services Group. The period between 1999 and 2009 saw enormous growth for BlackRock funds, in part because the company uses an elaborate risk-management theory of fund management. This laser-like focus on risk serves shareholders particularly well during economic downturns.
BlackRock was a leader in mortgage-backed securities (MBS) investments during the boom years of the housing bubble. Its iShares MBS Fund was released in 2007 with plenty of fanfare just months before the financial crisis started to unfold. Yet the iShares series was able to escape the crisis relatively unscathed.
Not only was BlackRock not bailed out by the U.S. government during the crisis, but the White House actually consulted it on how to keep the financial system functioning during the mid-crisis panic. As of December 2020, BlackRock has approximately $9 trillion in assets under management.
2. Vanguard
If a random sampling of the population was polled about the name of the largest mutual fund company, the Vanguard Group would probably win in a landslide.
Vanguard is the most serious challenger to the iShares series by BlackRock. Its popularity is due to its wide selection of fund offerings, over 190 in the U.S., low costs and a strong track record of positive returns. The Vanguard Group manages approximately $7.2 trillion as of January 2021.
3. Charles Schwab
Charles Schwab has been a trusted name in the financial services industry for almost five decades, with its primary fund offerings focusing on index funds. Its funds have gained popularity due to their low costs and no minimum investment amount. As of December 2020, Charles Schwab manages $6.7 trillion in assets, which includes TD Ameritrade assets.
I am an investment enthusiast with a deep understanding of the mutual fund market in the United States. Over the years, I have closely followed the dynamics of various fund families and providers, staying abreast of market trends, performance metrics, and key players. My knowledge extends to the nuances of mutual fund distinctions, such as the difference between mutual fund providers and mutual fund families.
Now, let's delve into the information provided in the article:
Mutual Fund Market Overview:
The United States boasts an extensive mutual fund market with hundreds of fund families and thousands of individual funds competing for investor dollars. As of February 2021, there are around 8,000 mutual funds managing a staggering $21 trillion.
Selecting Mutual Funds:
In the face of this vast array of options, investors often seek ways to identify top-performing mutual funds. One approach is to focus on the largest mutual fund companies, as their size can be indicative of success or, at the very least, a reasonable starting point.
Fund Families vs. Fund Providers:
A crucial distinction highlighted in the article is between mutual fund providers and mutual fund families. A mutual fund family is akin to a brand umbrella (e.g., Vanguard), while the mutual fund provider is the larger financial institution that owns the fund family (e.g., Wells Fargo). The focus is recommended on fund families for a more granular understanding.
Top Mutual Fund Companies:
The article lists the top mutual fund companies based on their assets under management (AUM). As of the provided data:
-
BlackRock Funds (iShares):
- BlackRock, Inc., based in New York City, manages approximately $9 trillion in assets as of December 2020.
- Known for its iShares series, BlackRock weathered the 2007 financial crisis well and played a crucial role in advising the U.S. government on maintaining financial system stability.
-
Vanguard:
- Vanguard Group is a major player, managing around $7.2 trillion as of January 2021.
- Vanguard is renowned for its extensive selection of funds (over 190 in the U.S.), low costs, and a history of positive returns.
-
Charles Schwab:
- Charles Schwab, with nearly five decades in the financial services industry, manages $6.7 trillion in assets as of December 2020.
- Known for its focus on index funds, Schwab's offerings are popular for their low costs and no minimum investment requirement.
These companies represent the giants in the mutual fund landscape, each with its unique strategies and strengths that have contributed to their success in managing substantial assets. Investors often consider factors like fund performance, cost structures, and investment philosophies when selecting mutual funds from these prominent fund families.
