Investments by households in mutual funds exploded in the three years ended Dec. 31, according to an Investment Company Institute analysis of flow of funds data from the Federal Reserve Board.
Households' mutual fund assets grew 76.4% to $1.524 trillion in 1993, from $864.4 billion in 1990. Most of the growth is attributable to the purchase of long-term fund shares and the appreciation in the value of the shares. Just three years ago, households' net acquisition of mutual funds was evenly divided between long-term and money market fund shares.
Household mutual fund purchases largely were financed by the sale of other financial products. The net acquisition of mutual funds relative to total financial assets increased steadily in the past three years, to 59.2% in 1993 from 20% in 1990, the report said.
Households, under ICI's definition, do not include personal trusts and non-profit organizations such as hospitals and universities. ICI divides household financial assets into liquid assets -including mutual funds, bank deposits, debt instruments and corporate equities - and non-liquid assets such as equity in non-corporate businesses and pension fund reserves.