Institutional Money to Drive Mutual Fund Growth

As retirees gear up to take money out of their 401(k) plans, mutual fund companies will have to look for other sources to drive asset inflow, says Boston Globe columnist Steven Syre.

"Fund companies are working harder to build up their businesses elsewhere, seeking potential new opportunities to sustain or even accelerate growth. That could mean international expansion to find new customers around the world or courting a different kind of customer, at home or abroad," Syre wrote. But the one group that fund companies are slowly targeting is institutional investors.

Institutions like pension funds, endowments, and other entities entrusted with big pools of money control about $17 trillion around the world, and Syre notes that fund companies that can tap such investors have the potential to substantially boost their assets under management.

That's exactly what some fund companies are doing.    

Last week, amidst its management reshuffle, Fidelity Investments said it would separate its institutional money management and distribution. "Splitting investment management into two parts will give Fidelity more capacity but also dedicate a group of money managers to work specifically for institutions that often act differently than mutual fund customers," Syre says.

In a similar vein, Sun Life Financial Inc. reported details of the sales at MFS Investment Management, its mutual fund company. "Our fastest-growing areas are not in the mutual fund business," MFS chief executive Rob Manning told Syre. Manning wants MFS to add $50 billion in assets over the next three to five years and expects institutional money to be a significant part of the story.