"There's never been anything like it."

Morningstar guru John Rekenthaler sums up his description of Vanguard's [profile] current mutual fund market dominance (both in terms of assets and flows) with that simple phrase. In his latest column, Rekenthaler takes a 22-year trip down memory lane to look at dominant fund firms of old, and then ponders the meaning of Vanguard's current position. (Spoiler alert: Rekenthaler isn't worried for Vanguard, for its fund shareholders, or for active fundsters.) Both trips are worth the read for the pensive fundster.

On the historical side, Rekenthaler offers two charts of combined U.S. mutual fund and ETF market share, one looking at annual net sales (net inflows) and the other at percentage of industry assets under management. Both charts trace back to 1993, when Fidelity [profile] held more than 10 percent of total AUM and dominated inflows. Vanguard took the top inflow spot four times from 1996 to 2001, with Janus [profile] and Putnam [profile] each winning a year. 2002 to 2006 was the heyday of Capital Group's American Funds [profile] in terms of flows, and since 2007 Vanguard has won the flows race every year. In 2009 Vanguard was the first fund firm to take in more than $100 billion in annual net inflows, and last year it was the first take in more than $200 billion ($219 billion, to be precise).

Thanks to the inertia of size and market performance, the AUM market share chart shows a smoother ride, with Fidelity fish being the biggest in the mutual fund pond from 1993 to 2001, and then again in 2003. Vanguard took the crown in 2002, again in 2004 and 2005, Capital Group took in 2006 and 2007, and Vanguard has held it ever since. Last year it ended with 19 percent of U.S. mutual fund and ETF AUM.

Just where are the past leaders now? Fidelity remains the second-biggest mutual fund firm by AUM, with a host of other businesses to boot, and the Boston Behemoth brought in record revenue and operating income last year, despite net outflows from its proprietary funds. Janus and Putnam both fell from grace thanks to the one-two early 2000s punches of the Dotcom Bubble bursting and the market-timing scandals, though both are still around and seem to be staging comebacks. Capital Group took it in the teeth, performance and flows speaking, after the financial crisis, but they're still the third-biggest fund firm by AUM, and in January they had their best month in six years.

There's at least one other once dominant fund firm worth mentioning here: Merrill Lynch Investment Management. If Rekenthaler's chart went back a little further, it would show the wirehouse's MLIM as the hot shop prior to Fidelity's rise. The reasons are obvious. This was before the no-load boom, and MLIM had the hottest proprietary funds of any of the wirehouses. Yet unlike the other previously dominant fund firms mentioned above, MLIM no longer exists, as the heyday of the broker-dealers' own proprietary funds is long gone. The MLIM dinosaur has evolved into part of something else: the bird that is BlackRock [profile], the world's largest asset manager and ETF shop. 

Edited by: Neil Anderson, Managing Editor


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