The United States has a very large mutual fund market. There are literally hundreds of different fund families and thousands of individual funds available, and all of them are vying for your investment dollars.
There are almost as many mutual funds as there are stocks traded on the NYSE Arca and NASDAQ combined. In fact, as of February 2021, there are approximately 8,000 mutual funds in the United States, managing approximately $21 trillion dollars.
Faced by this daunting array of options, investors need to find a way to separate the wheat from the chaff. One simple way to accomplish this is to focus on the biggest mutual fund companies. After all, mutual funds that serve their shareholders the best tend to attract more assets, so size seems like a reasonable proxy for success, or at least a reasonable starting point.
The process is easy: List all of the mutual funds for any given family, add up their combined total assets under management, or AUM, and see which companies investors have collectively poured in the most money. Since the relatively free market in the U.S. is supposed to reward success and punish failure, the biggest fund families ought to be the ones that have served investors the best over time.
A subtle yet important distinction must be determined before the list can be made, and that is the difference between mutual fund providers and mutual fund families.
Fund Families vs. Fund Providers
A subtle yet important distinction must be determined before the list can be made, and that is the difference between mutual fund providers and mutual fund families. A mutual fund family is like a brand name umbrella. Most investors encounter mutual funds through their family names, such as the first words in titles including Vanguard International Growth Fund or Templeton Global Bond Fund. If you organize the list by fund families, you are going to get the initial title to match for every mutual fund in a group.
The mutual fund provider is the larger financial institution that owns the fund family. For example, Wells Fargo, or the fund provider, owns the Wells Fargo Advantage Funds, or the fund family. The tricky issue with fund providers is they often handle more than just mutual funds, and they may have more than one fund family brand out in the market. As such, it is advantageous to focus on fund families instead of fund providers.
BlackRock Funds top the list in terms of assets held by a single fund family, followed by other familiar names such as Vanguard, Charles Schwab, State Street Global Advisors, and Fidelity Investments.
BlackRock has approximately $9 trillion in assets under management as of December 2020; the Vanguard Group manages approximately $7.2 trillion as of January 2021, while Charles Schwab manages $6.7 trillion, which includes TD Ameritrade assets, as of December 2020.
1. BlackRock Funds (iShares)
The New York City-based BlackRock, Inc., which carries the title iShares instead of BlackRock, released its first mutual funds in 1998 in conjunction with PNC Financial Services Group. The period between 1999 and 2009 saw enormous growth for BlackRock funds, in part because the company uses an elaborate risk-management theory of fund management. This laser-like focus on risk serves shareholders particularly well during economic downturns.
BlackRock was a leader in mortgage-backed securities (MBS) investments during the boom years of the housing bubble. Its iShares MBS Fund was released in 2007 with plenty of fanfare just months before the financial crisis started to unfold. Yet the iShares series was able to escape the crisis relatively unscathed.
Not only was BlackRock not bailed out by the U.S. government during the crisis, but the White House actually consulted it on how to keep the financial system functioning during the mid-crisis panic. As of December 2020, BlackRock has approximately $9 trillion in assets under management.
If a random sampling of the population was polled about the name of the largest mutual fund company, the Vanguard Group would probably win in a landslide.
Vanguard is the most serious challenger to the iShares series by BlackRock. Its popularity is due to its wide selection of fund offerings, over 190 in the U.S., low costs and a strong track record of positive returns. The Vanguard Group manages approximately $7.2 trillion as of January 2021.
3. Charles Schwab
Charles Schwab has been a trusted name in the financial services industry for almost five decades, with its primary fund offerings focusing on index funds. Its funds have gained popularity due to their low costs and no minimum investment amount. As of December 2020, Charles Schwab manages $6.7 trillion in assets, which includes TD Ameritrade assets.