Pension investments occupy half of the U.S. mutual funds?

We all know that the U.S. mutual fund market is the largest mutual fund market in the world. As of 2017, the total size of U.S. mutual funds has reached $18.75 trillion. Half of the U.S. mutual funds are held by U.S. pension assets, and observation of the development of U.S. mutual funds must necessarily focus on the impact of the investment behavior of U.S. retirement assets on U.S. mutual funds.

(1) Pension investment occupies half of the U.S. mutual funds

Of the $2,919.5 billion in U.S. retirement assets, the $80,970 billion DC plans (mainly 401Ks) and the $953.8 billion IRA accounts together account for 50%. And 401K plan and IRA assets are invested primarily in U.S. mutual funds.

4,468 billion of the $9,538 billion in IRA account assets were invested in mutual funds, with mutual funds accounting for 46.84%.

In contrast, of the $80,970 billion DC plan, $5,600 billion, or 69.12 percent, of the 401(k) assets are in 401(k) plans.

Of the assets held by DC plans in the U.S., $4,763 billion of assets are invested in mutual funds. Of this, $3,742 billion of the $5,600 billion in 401(k) assets were invested in mutual funds, or 66.79%.

Together, U.S. DC plans and IRA accounts hold about 49% of the total size of U.S. mutual funds, so U.S. retirement assets held in mutual funds really make up half of U.S. mutual funds. In a sense, the growth in the size of U.S. retirement assets has greatly contributed to the development of U.S. mutual funds.

(2) Pension investment drives the development of U.S. index funds

The preference of retirement assets in the U.S. for lower-rate index funds has largely driven the growth of U.S. index funds and contributed to the overall lowering of U.S. mutual fund fees. Of the $923.2 billion in mutual funds held by U.S. retirement assets, $3,698 billion are index funds, with index funds accounting for more than 40% of the total.

(3) Equity funds are the preferred choice for pension investments

Of course as long-term funds, both DC plans and IRAs favor equity funds that can bring long-term effective appreciation to assets. So we see that both DC plans and IRAs invest in a very high percentage of public funds in equity funds. Among them, 59% of mutual funds held by U.S. pension accounts are equity funds.