One reason for the increasing proportion of total financial assets controlled by pension funds and investment companies is that these intermediaries exploit the comparative advantages of size and diversification.

Question

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Pension funds and investment companies are able to pool their resources from a large number of investors, allowing them to achieve greater economies of scale and diversification across a broader range of assets than individual investors. This enables them to reduce their risks and potentially earn higher returns, leading to an increasing proportion of total financial assets under their control.

One Reason for the Increasing Proportion of Total Financial Assets