Despite increasing popularity of exchange-traded funds, mutual funds continue to hold a commanding share of 401(k) retirement assets, according to recent analysis. The trend underscores enduring investor preference for actively managed options in employer-sponsored plans.
- Mutual funds hold 62% of 401(k) assets, with $3.8 trillion in total value as of Q3 2025
- ETFs represent 38% of 401(k) assets, totaling $2.3 trillion
- The mutual fund share has remained stable over the past five years despite ETF growth
- Vanguard, Fidelity, and American Funds are top providers of mutual funds in 401(k) plans
- Only 14% of new 401(k) contributions in Q3 2025 went to ETFs, down from 20% in 2021
- Default investment options and plan sponsor selection are key drivers of mutual fund preference
Mutual funds remain the primary investment vehicle in U.S. 401(k) plans, accounting for approximately 62% of total assets as of the third quarter of 2025. This figure reflects a steady trend over the past five years, with mutual funds maintaining a 28-percentage-point lead over ETFs in 401(k) allocations. The persistence of mutual funds is attributed to their widespread availability through default investment options, employer plan design, and the continued demand for active management in retirement savings strategies. Key data shows that mutual fund assets in 401(k) plans totaled $3.8 trillion during the period, compared to $2.3 trillion in ETFs. Large institutional providers such as Vanguard, Fidelity, and American Funds continue to dominate the mutual fund space, offering diversified core portfolios that align with target-date fund structures. These funds often serve as default choices in employer plans, reinforcing their market share despite lower fees and greater liquidity offered by ETFs. The shift toward ETFs in brokerage accounts and taxable investing has not translated into equivalent momentum within tax-advantaged retirement plans. Only 14% of new 401(k) contributions in the third quarter were directed toward ETFs, down from a peak of 20% in 2021. This suggests that plan design, investor inertia, and the role of plan sponsors in selecting fund options play a decisive role in asset allocation decisions. Market participants, including plan sponsors, investment managers, and retirement advisors, are closely monitoring the trend. The continued dominance of mutual funds may influence fund provider strategies, including product development, fee structures, and marketing efforts targeting retirement plan participants.