Europe's $3.5 trillion mutual fund industry will grow at a 14% compound yearly growth rate between the end of this year and 2006, ahead of both the global 10% rate and a projected 9% rate in the U.S., according to CA Global Update.

The findings, published in the inaugural issue of CA Global Update, also said that European mutual funds are becoming the engine of growth in a global fund management industry that has been shrinking of late. CA estimated that worldwide assets under management were $38.2 trillion at the end of June, down from $39.3 trillion at the end of 2000.

In Europe however, assets have grown 10% compounded annually since the end of 1997.Global expansion was up 6%, and U.S. growth up 5% during the same period. Growth catalysts should bring European mutual funds to $6.2 trillion four years from now, according to the report.

European vehicles accounted for 42% of new net inflows into collective investment schemes worldwide in 1999 and 2000, but fell to 26% in 2001, due to Italian and Spanish redemptions that year, according to CA. However, the report estimated that assets in European investment vehicles rebounded by as much as 60% in the first half of this year.

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