Strong buying by US investors has helped the global mutual fund industry maintain its market share in spite of losing ground in Europe.

Research by ICI Global, a trade body, suggests US households reduced their direct holdings of equities by $6.1tn between 1990 and 2012, but increased their holdings of mutual funds by $6.5tn over the same period, a trend Chris Plantier, senior economist at ICI Global, partly attributed to falling fund fees.

This contrasts with figures released by the Association of the Luxembourg Fund Industry last year, indicating that mutual funds account for just 8 per cent of the financial assets of eurozone households, down from 12 per cent in 2006.

The conflicting trends mean that long-term mutual funds (ie excluding money market funds) account for $22tn, or 14.5 per cent, of global equity and bond market capitalisation of $151.6tn, virtually unchanged from their share in 2005, according to ICI Global.

The trade body predicts emerging markets will be the main driver of industry growth in the coming decades. China’s long-term mutual fund industry is tipped to grow from $340bn to $11.8tn by 2050, or even $15tn if Beijing introduces a defined contribution pension system that allows participants to invest in mutual funds.

ICI Global’s estimates are based on in-house research suggesting that a country’s ratio of long-term fund assets to gross domestic product is largely driven by four factors: per capita GDP, equity-market capitalisation relative to GDP, equity-market turnover relative to GDP and the ratio of DC pension assets to GDP.

Brazil chalked up the fastest growth in fund assets in the decade to 2012, with a rise of 1,007 per cent in dollar terms, or 542 per cent in local currency, ICI Global found. Chile and Ireland both experienced growth of more than 400 per cent, with the Australian, Swiss and Luxembourg industries also expanding rapidly.

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