Mutual Funds

According to the Investment Company Institute (ICI), a mutual fund is typically organized under state law as a business trust (which is sometimes known as a statutory trust), or a corporation. Funds that are operated as business trusts are administered by trustees. Those set up as a corporation are managed by officers and directors.

Mutual fund companies, or sponsors, are typically organized in states that have laws that are most favorable to business. At year-end 2024, the most popular form of organization was the Delaware statutory trust (which was utilized by 43 percent of mutual fund organizations). Thirty-seven percent of funds were organized as Massachusetts business trusts, 15 percent as Maryland business trusts, and 6 percent as other types (e.g., limited liability partnerships or in other domiciles, such as in Minnesota).

Mutual fund companies are really “shell companies.” The ICI reports that “unlike other companies, a mutual fund is typically externally managed; it is not an operating company and it has no employees in the traditional sense. Instead, a fund relies on third parties or service providers—either affiliated organizations or independent contractors—to invest fund assets and carry out other business activities.”

A mutual fund company must register with the Securities and Exchange Commission as an “investment company,” as directed by the Investment Company Act of 1940.

The mutual fund industry has a sophisticated array of distribution channels. Fidelity Investments, T. Rowe Price, and other big mutual fund complexes (i.e., families of mutual funds that are managed by the same company) sell directly to individual investors through an in-house sales force, through mutual fund supermarkets (i.e., distribution channels that give investors and investment advisors access to hundreds of different funds; examples include Charles Schwab and Fidelity), or through securities broker-dealers and financial planners (e.g., Capital Group). Smaller fund companies market their funds directly to the public or through their relationships with financial planners or broker-dealer firms such as Merrill Lynch or Edward Jones. Financial planners and broker-dealer firms receive a sales commission for their efforts.

In March 2017, 39 percent of investment company employees worked in fund management functions such as investment research, information systems and technology, trading and security settlement, and related areas. Twenty-eight percent of workers provided services to fund investors and their accounts, handling duties such as working in call centers to help new investors open accounts and existing investors monitor and make changes to their accounts. Twenty-four percent of workers had jobs in sales, marketing, product development and design, and investor communications. Ten percent of investment company workers had fund administration responsibilities (e.g., regulatory compliance, financial and portfolio accounting and auditing, data processing, risk management, producing prospectuses and financial statements for shareholders).

Characteristics of Mutual Fund Investors

In 2024, 56 percent of all U.S. households (or an estimated 126.8 million people) owned shares of mutual funds, according to the ICI. Among households owning mutual funds, the median amount invested was $125,000. Sixty-one percent of households with people age 79 and older owned mutual funds in 2024. Here are the ownership breakdowns for other age groups: 60 to 78, 58 percent; 44 to 59, 57 percent; 28 to 43, 49 percent; and 18 to 27, 35 percent.

"Almost two-thirds of US households owning mutual funds had annual incomes less than $150,000, and 53 percent were headed by individuals between the ages of 35 and 64 in 2024," according to data from the ICI. "The median mutual fund–owning household had $115,000 in household income, $300,000 in household financial assets, and $125,000 invested in three mutual funds, including at least one equity mutual fund."

Equity funds were the most commonly owned type of mutual fund in 2024; they were held by 80 percent of U.S. mutual fund–owning households. Other popular funds were money market funds, bond funds, and hybrid funds.