A mutual fund is operated by an investment firm that raises money from shareholders and then invests in a group of assets (equities or fixed income). The mutual fund portfolio manager invests in accordance with a stated set of objectives (guidelines). The mutual fund company raises money by selling shares of the fund to the public (usually there are very few stipulations on who can invest in the fund). Mutual fund managers then take the money they receive from the sale of the shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds, and money market instruments. Shareholders are free to sell their shares at any time. They can also exchange their ownership interest for shares in another fund sponsored by the same fund distributor. Mutual funds try to match or exceed an investment benchmark—the Standard & Poor’s 500 or Dow Jones Industrial Average, for example.
Mutual funds have grown increasingly popular in the last 30 or so years because funds are diversified (which reduces risk), affordable (investors can participate in funds with as little as $2,000 and invest as little as $50 a month), and liquid (they can be redeemed any day the financial markets are open), among other benefits. Approximately 57.2 million U.S. households owned mutual funds in 2018, up from 28.4 million households in 1995 and 12.8 million households in 1985.
The first mutual fund was started in 1774 in Holland by a Dutch merchant and broker named Adriaan van Ketwich, according to K. Geert Rouwenhorst in the Origins of Mutual Funds. A type of mutual fund was introduced in the United States in the late 1800s, but mutual funds did not become popular until the 1920s, when the first mutual, or “open ended” fund was launched. Mutual funds grew increasingly popular in the early 1950s, and the total number of funds surpassed 100. By 1990, mutual funds had become very popular investment options, with shareholder assets topping $1 trillion. The number of mutual funds worldwide grew from 6,778 in 1997 to 9,599 in 2018. The Investment Company Institute (ICI) reports that, in 2018, mutual fund companies managed $21.4 trillion in assets (including those of exchange-traded funds, closed-end funds, and unit investment trusts) for more than 101.6 million U.S. investors. The United States has the world’s largest mutual fund market, with 45 percent of total net world assets. Worldwide regulated open-end mutual fund assets were $46.7 trillion at the end of 2018, according to the ICI. The 10 largest firms managed 61 percent of mutual fund and exchange-traded fund assets in 2018.
There are many rewarding career paths for those interested in the mutual fund industry. Job opportunities range from financial analysts and research associates, to portfolio managers and fund accountants, to lawyers and risk managers. Entry-level positions require at least a bachelor’s degree in finance, accounting, business management, or a related field. Some firms prefer those with MBAs or graduate degrees in finance, financial engineering, accounting, or law.
Mutual fund companies are located throughout the United States, but in 2018, 23 percent of fund industry workers were employed in Massachusetts and New York. Fund companies in California, Pennsylvania, and Texas employed 25 percent of fund industry workers.
Diversity remains an issue in the industry. In December 2015, only 9.7 percent of fund managers were women, according to Morningstar, Inc., which provides stock market and final industry analysis and data. These female fund managers exclusively managed about 2 percent of the industry’s assets and open-ended funds
The ICI reports that 178,000 people worked for U.S. investment companies (mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts) in 2017. Fund industry employment grew 56 percent from 1997 to 2017. Job opportunities for those who work in the mutual fund industry are expected to be good during the next decade. Employment for financial analysts (including portfolio managers and fund managers) who work for securities, commodities, and other financial investment and related firms is expected to grow much faster than the average for all careers from 2018 to 2028, according to the U.S. Department of Labor.
- Strong pay. In 2019, portfolio managers earned salaries that ranged from $99,750 to $189,750, according to Robert Half’s 2020 Salary Guide: Accounting and Finance. Keep in mind however, that most new hires or people in lower-level support positions don’t earn that much money. For example, fund accountants and analysts start in the $40,000 to $60,000 range—still a good salary, but not on the level of portfolio managers. But salaries for accountants do increase quickly. Within three to five years, Robert Half reports that 50 percent of mutual fund accountants earn between $64,750 and $102,750.
- Good employment outlook. Job opportunities for financial analysts who work for securities, commodities, and other financial investment and related firms are expected to grow by nearly 22 percent from 2018 to 2028, according to the U.S. Department of Labor, or much faster than the average for all careers. Growth of 32 percent is expected for accountants and auditors in this sector during the same time period.
- Exciting work environment. If you love the process of researching the merits of stocks, bonds, and other securities, this career will be exciting and rewarding. The mutual fund industry is known for a less-stressful work environment than the hedge fund, private equity, and venture capital industries, so many workers enjoy a regular 9-to-5 schedule with weekends off.
- Good opportunities to advance at large funds. A combination of hard work and investing acumen will help you move up the ladder to the position of fund manager. Some highly experienced mutual fund managers even start their own funds.
- Rewarding. It’s personally fulfilling to help clients grow their investments and meet their life goals such as saving for college or retirement.
- Not much gender diversity. In December 2015, only 9.7 percent of fund managers were women, and they exclusively managed a paltry 2 percent of the industry’s assets and open-ended funds, according to the Morningstar Research Report: Fund Managers by Gender. As a result, women at some firms may encounter occasionally challenging work environments and limited opportunities for advancement. Large mutual fund companies have established programs to encourage women to enter the field, but progress has been slow.
- Clients. While the majority of your clients will be easy to work with, some customers can be challenging: questioning your recommendations, inundating you with frantic phone messages and e-mails when the market experiences a temporary downturn, etc.
- Few advancement opportunities at small funds. You may be stuck in the same position for years, regardless of your talent, unless you decide to move to a larger firm.
- Sometimes-stressful work environment. As a fund manager, your investment and allocation decisions will be scrutinized by both investors and upper management. You’ll need a thick skin and good communication and interpersonal skills to respond to questions about your judgement.
- Limited geographic potential. Job opportunities are available throughout the country, but you will have stronger employment prospects if you work in Massachusetts, New York, California, Pennsylvania, and Texas—where more than 48 percent of investment fund companies are located.
- Financial Quantitative Analysts
- Mutual Fund Accountants and Auditors
- Mutual Fund Analysts
- Mutual Fund Compliance Professionals
- Mutual Fund Customer Service Representatives
- Mutual Fund Financial Managers
- Mutual Fund Lawyers
- Mutual Fund Marketing Specialists
- Mutual Fund Portfolio Managers
- Mutual Fund Risk Managers
- Mutual Fund Wholesalers