A new Cerulli report says that institutional ownership of mutual funds totaled $4.7 trillion at year-end 2009, an increase of 8.9 percent from prior year totals.

However, institutional investors' overall share of mutual fund ownership declined slightly to 46.3 percent, yet over the longer term the upward trend remained intact (up from 43.1 percent in 2004).

Accroding to the report, the good news for managers is that institutions are increasingly buying mutual funds, meaning new distribution outlets for a traditionally retail-oriented product. But the bad news is that these sophisticated and fee-sensitive institutional buyers will expect more from their mutual fund managers but demand to pay less.

The report also revealed that institutional client assets accounted for 62.9 percent of the total asset manager addressable market in 2009, a decrease of nearly two percent from 2008’s marketshare, while retail client assets accounted for 37.1 percent. "Longer term, retail clients have slowly been gaining ground on institutions -- 2008’s precipitous decline notwithstanding," trhe report said.

"Institutional investors have proven to be better investors: they typically have more sophisticated resources at their disposal, are diversified across esoteric asset classes, have access to alternatives with high investment minimums, and typically remain invested during downturns. Retail investors, on the other hand, were quick to exit financial markets in 2008 and park money in cash to wait out the storm, and are more inclined to be more heavily invested in long-only equity positions which rebounded sharply in 2009." 

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