U.S. credit crisis seen changing fund industry

WASHINGTON, April 17 (Reuters) - The U.S. credit crisis will most likely hurt fund performance in the short-term and spur consolidation in the asset management industry, experts said on Thursday.

"The liquidity crisis will have the impact of lowering returns because there will be less leverage available," the founder of Lipper Advisory Services, Michael Lipper, told a Mutual Fund Directors Forum conference.

"It will also have some impact on the plans of privately managed fund companies on expanding on using external debt capital."

In the first three months of the year, U.S. equity funds posted their worst quarterly performance in 5-1/2 years, according to Lipper Inc data.

China-region focused funds, and funds that invest in the telecom sector helped contribute to the decline, while gold-oriented funds and funds that profit from falling markets helped mitigate losses.

Many Americans own mutual funds in their retirement plans and college savings accounts and have witnessed their investments falter amid the U.S. market downturn.

Paul Kraft, a partner with accounting firm Deloitte & Touche told the same conference that the credit crisis may trigger consolidation in the asset management space.

Kraft's comments echoed those of money manager BlackRock Inc's (BLK.N) chief executive Laurence Fink. Earlier this week, Fink said he expects consolidation in the industry as the credit crisis hurts the quality of assets.

But overall, Lipper said he believed the crisis is cyclical and by the end of a five-year period there would be not be that much impact. (Reporting by Rachelle Younglai; Editing by Tim Dobbyn)