Mutual funds are investment companies that are registered with the Securities and Exchange Commission and regulated under the Investment Company Act of 1940. Mutual funds purchase financial assets using money obtained mainly through the issuance of shares. The net asset value (NAV) of each share of a mutual fund reflects the market value of the fund's holdings less any expenses charged by the fund. Mutual funds are "open end" investment companies; that is, they are permitted to issue an unlimited number of shares and are required by law to redeem the shares at NAV.
Mutual funds typically have specific investment objectives and invest in a limited class of assets, such as domestic stocks, stocks issued by companies in particular industries or in certain areas of the world, corporate bonds and notes, Treasury securities, municipal securities, or some combination of these asset classes. Shareholders receive returns through a pass-through of current interest and dividends, distributions of realized capital gains, and an accumulation of unrealized capital gains.
The financial accounts mutual fund sector covers all open-end investment companies that report to the Investment Company Institute (ICI), including variable annuity mutual funds. Money market mutual funds (shown on tables F.121 and L.121), exchange traded funds (shown on tables F.123 and L.123), and hedge funds are not included. Mutual funds' holdings of debt securities are reported at market value.