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Even before the current market turmoil took hold, the U.S. fund industry was set for softer growth in the years ahead, says a new report from Institutional Shareholder Services Inc.’s (ISS) research division, ISS Market Intelligence.

The firm suggested that industry assets were already slated to grow more modestly over the next few years, and the fallout from the Covid-19 outbreak will likely just exacerbate this slowdown.

Before the pandemic, ISS was expecting average annual asset growth of 6.5%, down from 8.8% for the past five years.

However, if a recession materializes (as most market watchers now expect) that growth could slow even further, to an estimated average 5.2%.

“Crisis tends to accelerate trends already in motion,” said Christopher Davis, head of U.S fund research at ISS Market Intelligence.

“The 2008 financial crisis, for example, accelerated flows into index funds and an aging society’s move into bond funds,” he said.

These are expected to continue in the years ahead too, alongside the slowdown in asset growth.

For instance, the ISS report projects that passive funds will overtake active funds, so that index funds will account for more than half of long-term fund assets by 2024.

“The forces driving retail investors to passive strategies, including demands from fund buyers and regulators for transparency, aligned interests, and lower costs, are here to stay,” ISS said.

The report also predicts that while mutual funds will see assets decline, they will still dominate the fund landscape, with an estimated 72% market share by 2024, down from 79% in 2019.

Other anticipated trends include an ongoing shift from equities to fixed income as the population ages, and continued growth in the direct-to-investor distribution model.