Maybe it’s high time Michael Lipper sold his fund analysis business: after 25 years studying reams of mutual fund data, he has a whole lot of zeros swimming before his eyes. As he sold Lipper Analytical to Reuters this summer, he predicted worldwide mutual fund assets will grow from an astronomical $7 trillion now to a galactic $30 trillion in just ten years.
Reuters CEO Peter Job seems more reluctant to prognosticate himself into a corner. ‘It’s big,’ he says simply of the fund business. ‘And it’s global.’
While a host of factors – from a bear market lurking in the wings to far flung currency crises – could at any time put into question Lipper’s numerical assertions, Job’s statement is hard to dispute. For Reuters is wagering on a different kind of ‘bull market’: one of mutual fund accounts, not stocks. No matter the stops and starts of the Dow, monthly spurts of retirement savings will relentlessly pour in.
Lipper also exudes statistical glee with regard to the global arena. In the US, baby-boomers may already be eyeing retirement, and mutual fund managers the reversal of the money flow. But overseas the phenomenon is just getting into gear. Today’s score is US funds, $5 trillion; non-US funds, $2 trillion. In a decade it will be $15 trillion all. Looking beyond ten years, Lipper predicts that non-US mutual funds will outweigh stateside ones.
What’s behind the shift? Simple demographics. Massive fund growth in Europe is inevitable as populations age and defined benefit state pension plans become increasingly under-funded. Defined contribution plans, with mutual funds as the primary vehicle, are all the rage. In Asia, massive population pools are just now entering their prime spending and saving years. And don’t count the US out just yet: life’s longer, and so are the labor years necessary for a comfortable retirement so the well isn’t drying up just yet.
Still, the current message to the North American investor relations profession is unequivocal: get thee to Europe. Staid and stodgy continental pension plans ponderously investing in the bonds of local industrial giants are dinosaurs. Dynamic young fund managers looking to invest client savings in ‘global’ equity portfolios are the new ruling class. And according to Lipper, $13 trillion in spanking new euros will be crossing their hot little palms by 2007.
No matter the size of their companies, North American IROs would do well to look to other continents for capital. This route to riches is not just for blue-chips, with global business and global investor relations long voyaging hand-in-hand. In this issue’s cover story, we look at a new breed of small-caps taking their roadshows to Europe in search of the fuel for rapid growth. Like Lipper, they can bet on it.
