In order to provide you with a comprehensive answer, I am providing
data for multiple NAICS codes along with their descriptions. The
total for the NAICS codes that I believe meet your definition of the
"investment management industry" comes to $2,011 Billion, nearly all
of which is categorized as open-end investment funds.
"52392 - Portfolio Management Industry Revenue 2003-2004 $75,438 Million"
"This industry comprises establishments primarily engaged in managing
the portfolio assets (i.e., funds) of others on a fee or commission
basis. Establishments in this industry have the authority to make
investment decisions, and they derive fees based on the size and/or
overall performance of the portfolio. Industry participants manage the
money invested in various funds. Normally, portfolio managers are
hired by the directors of the fund (organized as a business, trust, or
similar structures). Portfolio managers are given authority over the
investment decision, implying that they invest the money in the fund.
However, the investment decision has to be in accordance with the fund
prospectus. The prospectus will identify whether the fund is a
diversified fund, income fund, growth fund, etc."
"52591 - Open-End Investment Funds Industry Revenue 2003-2004 $1,934 Billion"
"This industry comprises legal entities (i.e., open-end investment
funds) organized to pool assets that consist of securities or other
financial instruments. Shares in these pools are offered to the public
in an initial offering with additional shares offered continuously and
perpetually and redeemed at a specific price determined by the net
asset value. Open-end investment funds are operated by investment
companies. These companies raises money from shareholders and invest
in a group of assets. The asset class(es) that the funds are invested
in is in accordance with a stated set of objectives. Being open-end
funds, mutual funds or investment companies, are required to redeem
outstanding shares at any time on request. A second characteristic,
although not a requirement, is that open-end funds continuously offer
new shares to the public."
"52599 - Other Financial Vehicles Industry Revenue 2003-2004 $2,097 Million"
"This industry comprises legal entities (i.e., funds (except insurance
and employee benefit funds; open-end investment funds; estates and
agency accounts; and Real Estate Investment Trusts - REITs)). Included
are entities issuing collateralized mortgage obligations (CMOs). A CMO
is a form of derivative security backed by a portfolio of mortgage
loans. In general, the holder of a CMO owns the rights to receive
interest and principal payments from outstanding debt. CMOs are backed
by a pool of mortgage-backed securities (MBS) or mortgage loans
themselves. These securities were developed to offer a wider range of
investment time frames and greater cash flow certainty than was
typically available with original MBS. These entities pool mortgages
with similar characteristics, and finance their activities by issuing
mortgage-backed securities. The goal is to produce a bond-like
investment product that fits investors' needs better than direct
participation in the loans. Issuers create different tranches by
restructuring the principal and interest payments of the loans. A
tranche constitutes a class of bondholders with similar maturities. A
CMO can be made up of a number of different tranches, where
bondholders will receive payments, either interest only, interest and
principal or principal only payments, at different maturities
depending on the life of the underlying loan and the type of CMO
tranche held. By subscribing to a specific tranche, investors can
therefore time the start of repayments on their invested funds. If an
investor buys a CMO tranche that specifies payments will not be made
until ten years into the life of a thirty-year mortgage, the investor
will not receive any income from the CMO until ten years has passed.
Also included in the industry are closed-end funds, a type of
investment company that issues a fixed number of shares that are
listed on a stock exchange or traded in the over-the-counter market.
Finally, the industry comprises unit investment trusts (UIT), which is
a registered investment company that buys and holds a generally fixed
portfolio of stocks and bonds. Units in the trust are sold to
investors who receive their proportionate share of dividends on
interest paid by the UIT investments."
Source: "Industry Snapshots" IBISWorld
http://www.ibisworld.com/snapshot/industry/default.asp?page=industry&industry_id=1342
http://www.ibisworld.com/snapshot/industry/default.asp?page=industry&industry_id=1345
http://www.ibisworld.com/snapshot/industry/default.asp?page=industry&industry_id=1315
For insight into the economics of hedge funds, this admittedly old
article may be useful:
"Follow the Money: Revenue Growth This Year And Beyond" Hedge World
(November 8, 2001) http://www.pif.ky/news/det.asp?vrcts=&az=en&vrcta=79&ct=fun
Sincerely,
Wonko
Search terms: "hedge fund" industry revenue; United States 2004
revenue industry "investment management" |
Clarification of Answer by
wonko-ga
on
14 Nov 2005 11:05 PST
I have conducted an extensive further search, and I have not been able
to locate another source of revenue figures for that NAICS code.
Unfortunately, the Economic Census does not track that code or
anything else in NAICS code 525 other than REITs. However, I was able
to check the Portfolio Management industry revenue number against the
Economic Census at http://www.census.gov/prod/ec02/ec0252i05t.pdf. In
2002, industry revenue was about $65.5 billion according to the
Economic Census. That agrees reasonably well with the IBISWorld
figure of about $75.5 billion for 2005.
I do not have any reason to doubt the legitimacy of the source given
that its business is the collection of industry data. The open end
fund industry certainly has many fees other than just those related to
a percentage of assets under management, including low balance fees,
loads, short-term trading fees, and mutual fund supermarket
transaction fees. Hedge funds and exchange traded funds also account
for additional industry assets (at least $1.5 trillion according to
estimates I found) and, in the case of hedge funds, substantially
higher asset-based fees, including fees based on profitability.
In the case of a mutual fund supermarket transaction, it would not
surprise me if both the firm operating the supermarket and the firm
actually managing the fund effectively double count revenue with the
firm operating the supermarket treating the entire transaction fee as
revenue and then having a corresponding expense to pass along a
portion to the fund manager, thereby creating additional industry
revenue from a single transaction. I also think it could be possible
that fund companies like Fidelity that have extensive brokerage
operations may also have those revenues included in this figure.
I suggest you contact IBISWorld with any questions you may have about
how they calculated the revenue figure. Their contact information is
here: http://www.ibisworld.com/static/contact.asp. They also provide
a comprehensive industry report, which is available for purchase at
the following location for $595:
http://www.ibisworld.com/industry/definition.asp?industry_id=1342.
Sincerely,
Wonko
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