Mutual Fund Expense Ratios See Biggest Spike Since 2000
Which funds had the biggest cuts and increases in expense ratios?
The average fund investor paid more for his or her fund management in 2009 than in 2008. Overall, the average fund investor paid an expense ratio of 0.887% compared with 0.874% in 2008. It's the largest jump in fees since 2000. Those figures are for open-end mutual funds exclusive of exchange-traded-funds. You can see the details here.
The market's swoon was largely responsible. Official 2009 expense ratios largely cover a period from Nov. 1, 2008, through Oct. 31, 2009. The market hit bottom in early March 2009, and that reduced fund asset levels significantly. Most funds have breakpoints embedded that reduce management fees as assets rise and raise them as assets shrink. So, it's no surprise that expense ratios popped. In fact, when I wrote about 2008 expense ratios last year, I said that 2009 expense ratios were likely to increase.
The good news is that the market's tremendous rebound is already leading to lower expense ratios for fiscal 2010. We won't have the data until a year from now, but I would guess that 2010 expense ratios were close to in line with those of 2008. In fact, if you compare fund semiannual reports from last summer with annual reports printed in the last quarter, you can already see the trend to lower fees.
Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.