As mutual fund complexes have reported their first quarter 2002 earnings in recent weeks, analysts say it is apparent that sluggish markets have continued to drag down the industry, making it a real challenge for fund companies to develop and market products.

An informal review of the earnings showed that, in most cases, revenues and profits recovered slightly from last year's dreadful fourth quarter, when the Sept. 11 terrorist attacks bludgeoned the already-troubled markets and further postponed the long-awaited economic recovery. However, first quarter earnings did not match the levels of the same period of 2001. Meanwhile, assets under management continue to languish. And some companies are still cutting expenses.

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