The mutual fund industry is poised for solid growth even as it faces challenges and consolidation after a downturn caused by the steep bear market of the last three years.<\/p>\n
That’s the bottom line of a report released yesterday by the University of Massachusetts at a seminar in Boston on the future of the financial-services industry.<\/p>\n
Meanwhile, Federal Reserve Vice Chairman Roger Ferguson offered his insights on consolidations among banks, essentially assuring the seminar audience that the industry will stay competitive despite its mergers.<\/p>\n
The UMass report painted a largely upbeat picture of the future of the asset-management industry – with several caveats.<\/p>\n
“What pleasantly surprised me was, when talking to the industry experts, everybody was so upbeat about the prospects,” said Arindam Bandopadhyaya, lead author of the study.<\/p>\n
But the UMass report doesn’t offer a completely rosy picture. It suggests that continued mergers will squeeze midsized mutual fund firms, allowing the largest to prosper while small, boutique firms also win business.<\/p>\n
Advances in technology could lead many mutual fund companies to outsource back-office jobs, possibly to overseas firms. And a potential rise in the popularity of hedge funds could take customers’ dollars away from mutual funds, the report said.<\/p>\n
Other industry experts said mutual fund firms face another key hurdle: restoring investors’ faith after a painful bear market and recent industry scandals.<\/p>\n
“The biggest challenge is regaining the confidence of retail investors,” said Dennis Ferro, chief executive of Evergreen Investments.<\/p>\n
Ferro said midsized fund firms will still have a place in the industry, as long as they focus what they offer and not try to “be all things to all people.”<\/p>\n
The fund industry will probably enjoy moderate employment growth in the next several years, Ferro said.<\/p>\n
Edward D’Alelio, executive-in-residence at UMass and a former Putnam Investments manager, said he doesn’t expect a boom in jobs in the near future despite the recent stock market rally. Most fund firms, he said, will initially be cautious about adding positions.<\/p>\n
The Fed’s Ferguson said he sees consolidation also continuing in the banking industry. But he said the industry has seen a relatively slow rate of change after Congress knocked down legal barriers that prevented banks from entering other financial businesses in 1999.<\/p>\n
“The `financial supermarket’ . . . is in fact much more difficult to implement than many have thought,” Ferguson said.<\/p>\n
Ferguson said it’s important for antitrust authorities to keep a close eye on future mergers.<\/p>\n
But Ferguson said customers still have a variety of banking choices, and noted that more than 1,000 banks opened in the past decade: “I am optimistic that this dynamic competitiveness . . . will continue.”<\/p>\n
Caption: CHEER: Federal Reserve Vice Chairman Roger Ferguson talks yesterday at the Federal Reserve Bank of Boston. Staff photo by Faith Ninivaggi<\/p>\n","protected":false},"excerpt":{"rendered":"
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