African-American, Hispanic, Asian investors underrepresented, survey says

African-American and Hispanic households are still underrepresented among mutal fund investors despite at least some efforts to market…

African-American and Hispanic households are still underrepresented among mutal fund investors despite at least some efforts to market to those groups.

The finding was reflected in the latest survey by the Investment Company Institute, the fund industry’s biggest trade organization, which regularly examines the demographics of fund shareholders.

The study, based on a survey in May of 3,019 randomly selected U.S. households, shows that 88% of fund shareholders are Caucasian. Meanwhile, African-Americans account for a mere 6%, while Asians make up 2% and Hispanics 5%.

“It surprises me but doesn’t surprise me,” says Geoff Bobroff, a mutual fund consultant in East Greenwich, R.I.

“I would have thought the percentage of white shareholders would have been somewhat lower.”

Sandy West, author of the study, the 2001 Profile of Mutual Fund Shareholders, plays down the significance of the disparity between Caucasian and non-Caucasian shareholders.

“Our survey sample replicates the U.S. population as a whole. Therefore the percentage of mutual fund shareholders is likely to parallel that distribution of ethnic diversity throughout the country,” says Ms. West, the ICI’s director of market and policy research.

Nevertheless, Ms. West acknowledges that race may play a factor in mutual fund investing.

Whites make up roughly 75.1% of the population, while African-Americans and Asians account for 12.3% and 3.6%, respectively. People of Hispanic origin make up 12.5% of the population, according to U.S. Census Bureau figures

“You have to have disposable income in order to save,” says Ms. West. “For many ethnic groups, this is much harder to obtain than it is for others.”

Fund companies are starting to see that minority investors are underrepresented as shareholders. Fidelity Investments in Boston, for example, recently redesigned its investor center in Coral Gables, Fla., to better accommodate Spanish-speaking investors.

State Street Research and Management Co., also in Boston, prints some of its prospectuses in Chinese and Spanish. Others offer dedicated foreign language customer service phone lines.

The ICI teamed up last year with the National Urban League to promote greater awareness in investing among African-Americans. That program is called “Investing for Success.”

“It makes sense,” Mr. Bobroff says of fund companies’ efforts to court minority investors. “Some of these different cultures have an enormous propensity to save money.”

The survey also showed that about 52% of U.S. households now invest in the stock market through mutual funds, up from 44% in 1998. Some 93.3 million Americans now invest in funds, compared with 89.7 million three years ago.

The investment decisions are about equally divided between the sexes: men decide in 24% of the households surveyed, women in 23%. The responsibility is shared in the remaining households.

Some 31% of shareholders own funds solely through defined-contribution plans, while 38% own funds only outside of such plans. The rest own funds both inside and outside their workplace plans.

Some 48% of shareholders cite workplace plans as their primary method for purchasing funds. Meanwhile, 37% say their main method is through a financial adviser.

Only about 15% report buying most of their shares directly.

Shareholders who buy funds through advisers have a median age of 51 years, eight years above the median age of shareholders who buy primarily through retirement plans and two years above that of direct buyers.

“The median mutual fund holdings of these shareholders is $40,000, or 27% of household financial assets,” the study says.

The study also found that most mutual fund shareholders are disciples of the buy-and-hold philosophy of investing. Some 97% of fund shareholders regard their mutual fund investments as long term, while 83% indicate they are not too worried about short-term market gyrations.

Also, 47% of shareholders purchased their first fund before 1990, while another 39% made their first investment between 1990 and 1997.