Securities markets in Mexico are orderly and relatively innovative; however, corporate markets lag behind those in comparator countries. The government bond market accounts for the bulk of the fixed-income segment, and is well developed and active. While financial savings rates have been growing, little has been transformed into long-term investments. Most of the savings remain in traditional savings accounts. Institutional investors still hold the bulk of their assets in government bonds. Mexico will need to find solutions to further develop its capital market to fund its development needs. In the infrastructure sector alone, the country needs approximately US$230 billion of new investments. In the corporate sector, provision of financing by banks fare well below peers, especially for small and medium enterprises. Meanwhile, the pension fund industry, growing at about US$20-US$30 billion annually, requires sound investment outlets. The large concentration in the control of financial intermediaries raises complex issues and may stunt market development. The investor base in the equity market lacks diversity, with limited development of the retail segment. Mutual funds could play a key role in mobilizing long-term finance. Most funds are used by banks as alternative ways of tapping clients' savings. Mutual funds (particularly open ones) are much more sensitive to liquidity risks than institutional investors with long-term horizon. The independent distribution vehicle created under the 2002 reform has not been very successful in fostering sustainable entry. Restrictions placed on institutional investors limiting investment to only publicly offered securities keep them away from more specialized investments.