Fund Company

What Is a Fund Company?

"Fund company" is a commonly used term to describe an investment company, which is a corporation or trust engaged in the business of investing the pooled capital of investors in financial securities. This is most often done either through a closed-end fund or an open-end fund (conventional mutual fund). Fund companies can also offer ETFs, and other vehicles called separate accounts and CITs. In the U.S., most fund companies are registered and regulated by the Securities and Exchange Commission under the Investment Company Act of 1940.

For example, the Fidelity 500 Index Fund (FXAIX), a large-blend fund, has more than $308 billion in assets under management, as of March 31, 2021. Holdings include Apple, Microsoft, and Amazon.

Key Takeaways

  • A fund company is a financial firm that is primarily focused on investing in securities; it does so by investing the pooled capital of a number of investors.
  • Fund companies offer closed-end or open-end funds, as well as ETFs, separate accounts, and CITs.
  • Most funds are regulated by the U.S. Securities and Exchange Commission and must be registered according to the Investment Company Act of 1940.
  • Fund companies employ teams of portfolio managers, analysts, and other personnel to help manage the investment options offered by the firm.

Understanding Fund Companies

Fund companies are business entities, both privately and publicly owned, that manage, sell, and market closed-end and open-end funds to the public. They typically offer a variety of funds to investors, which include portfolio management and occasionally custodial services. Not all fund companies custody their own assets. They may work with another institution that custodies the assets and communicate performance value to the custodian after the fund company's fund accountants have struck the net asset value (NAV) for each of the mutual funds at the close of each day.

How Fund Companies Work

Fund companies employ teams of portfolio managers, analysts, fund accountants, compliance and risk monitoring personnel, and many other individuals who are in charge of managing the investment strategies that are offered by the fund company. The strategies might be active or passive. An active strategy involves picking and investing in specific stocks that are expected to outperform the overall market. A passive strategy purchases a pre-set basket of stocks that are a part of an index or a sector, such as the S&P 500 Index or the Health Care sector.

Vanguard and Fidelity are two of the biggest mutual fund companies in the world.

Biggest Mutual Funds by Assets Under Management (AUM)

The largest mutual fund companies in the world house and distribute many funds simultaneously. Here is a list of the largest funds in the U.S. as of March 31, 2021, according to 

  • BlackRock, $9 trillion
  • Vanguard, $7.2 trillion
  • Charles Schwab, $7.07 trillion
  • Fidelity Investments, $3.8 trillion
  • State Street Global Advisors, $3.5 trillion
  • PIMCO/Allianz, $2.89 trillion
  • JP Morgan, $2.8 trillion
  • Capital Group, $2.3 trillion
  • BNY Mellon (Dreyfus), $2.2 trillion
  • Amundi Asset Management, $1.9 trillion
Article Sources
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  1. "Fidelity 500 Index Fund." Accessed April 20, 2021.

  2. Mutual Fund Directory. "Top 100 Mutual Fund Companies Ranked by AUM." Accessed July 6, 2021.

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