The Investment Company Institute released its "2026 Investment Company Fact Book," an annual compilation of statistics and commentary on the mutual fund space. Subtitled, "A Review of Trends and Activities in the Investment Company Industry," the latest edition tells us, " With stock markets rising around the globe in 2025 (17% in the United States, 36% in Europe, and 29% in the Asia-Pacific region) worldwide total net assets of equity funds, which invest primarily in publicly traded stocks, increased by 19% to $42.6 trillion at year-end 2025. Bond funds -- which invest primarily in fixed-income securities -- saw their total net assets increase 21% over the same period, somewhat reflecting total returns (capital gains and interest income) in bond markets. In 2025, the total return on bonds was 7% in the United States, 1% in Europe, and 1% in the Asia-Pacific region. Net assets of money market funds, which are regulated funds restricted to holding short-term, high-quality debt instruments, rose by 15%." We excerpt from the latest "Fact Book" below.
Discussing "Worldwide" mutual funds (page 9), ICI writes, "Worldwide net sales of money market funds declined somewhat in 2025 but still attracted $1.3 trillion in net inflows.... Investors across all geographical regions continued to demonstrate demand for money market funds, with the $901 billion in inflows in the United States accounting for more than two-thirds of total net inflows. Investor demand for money market funds in the Asia-Pacific Region and Europe was $217 billion and $169 billion in 2025, respectively."
They explain, "Investors use money market funds because they are professionally managed, tightly regulated vehicles with holdings limited to high-quality, short-term debt instruments. As such, they are highly liquid, attractive, cash-like alternatives to bank deposits. Generally, demand for money market funds is dependent upon their yields and interest rate risk exposure relative to other high-quality fixed-income securities."
ICI continues, "In the United States, money market funds continued to see inflows in 2025 because of sustained demand from both retail and institutional investors. High market yields -- relative to the past 16 years -- and the low interest-rate risk offered by money market funds continued to drive this demand. These reasons are also likely the key drivers for inflows into money market funds in both Europe and the Asia-Pacific region."
Under the section "Role of Investment Companies in Financial Markets," they say, "Investment companies held 24% of bonds issued by US corporations and foreign bonds held by US residents at year-end 2025 and 19% of the US Treasury and government agency securities outstanding. Investment companies also have been important investors in the US municipal securities market, holding 29% of the securities outstanding at year-end 2025. Finally, mutual funds (primarily prime money market funds) held 25% of the US commercial paper market -- a critical source of short-term funding for many major corporations around the world."
ICI writes in Chapter 3, "Overview of Mutual Fund Trends," "The US mutual fund industry remained the largest in the world, with $31.4 trillion in total net assets at year-end 2025. The majority of US mutual fund net assets were in long-term mutual funds, with equity funds alone making up 52% of US mutual fund net assets. Money market funds were the second-largest category, with 25% of net assets. Bond funds (18%) and hybrid funds (6%) held the remainder."
They state, "A variety of factors influence investor demand for mutual funds. For example, US households rely on equity, bond, and hybrid mutual funds to meet long-term personal financial objectives, such as preparing for retirement, saving for emergencies, or saving for education. US households, as well as businesses and other institutional investors, use money market funds as cash management tools because they provide a high degree of liquidity and access to short-term market yields."
ICI adds, "Investor demand for mutual funds in 2025 showed notable differences across fund types. Money market funds experienced strong demand as investors were attracted to relatively high short-term yields when compared with those received in bank deposit accounts. Bond mutual funds saw modest demand, likely driven by bond market performance and portfolio rebalancing. By contrast, equity mutual funds experienced outflows in 2025 (despite strong stock market returns), primarily reflecting portfolio rebalancing and an ongoing shift to other products."
Discussing, "Investors in US Mutual Funds," they comment, "Demand for mutual funds is, in part, related to the types of investors who hold mutual fund shares. Retail investors (i.e., households) held the vast majority (87%) of the $31.4 trillion in US mutual fund net assets at year-end 2025.... When looking at only long-term mutual funds, the share of net assets held by retail investors was even higher (94%). Retail investors also held substantial money market fund net assets ($5.3 trillion), but this was a relatively small share (19%) of their total mutual fund net assets ($27.4 trillion)."
The Fact Book continues, "By contrast, institutional investors such as nonfinancial businesses, financial institutions, and nonprofit organizations held a relatively small portion of mutual fund net assets. At year-end 2025, institutions held $3.9 trillion or 13% of mutual fund net assets.... The majority (62%) of which was held in money market funds. One of the primary reasons institutions use money market funds is to help manage their cash balances."
The section on "Money Market Funds" (page 46), explains, "In 2025, money market funds saw substantial inflows of $672 billion ... as short-term interest rates remained elevated. Demand was positive for all categories of money market funds in 2025, with government money market funds experiencing the bulk of inflows ($558 billion). Prime money market funds and tax-exempt money market funds saw inflows of $102 billion and $12 billion, respectively."
Finally, ICI writes, "Despite the Federal Reserve's rate cuts in 2025, money market funds remained appealing to investors when compared to other short-term options like bank deposits. The yield on taxable money market funds averaged 3.9% at year-end 2025 compared with 0.6% for money market deposit accounts.... Money market funds attract both institutional and retail investors due to their combination of high liquidity, minimal risk, and solid returns. In periods of market volatility, many investors often shift toward government money market funds in search of greater quality and stability."
