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Fund Spy

Fund Fees Are Dropping

In Part One of a three-part series, Morningstar's Russ Kinnel details how last year's market rally led to a decline in expense ratios, allowing for cheaper funds.

Fund fees dropped in 2013 courtesy of the huge stock market rally that year. Market rallies cause the total assets under management of the fund industry to grow tremendously and that in turn triggers breakpoints in mutual fund management fees. Those breakpoints are built into a fund's fee structure so a fund charges less for each additional dollar managed over various AUM thresholds.

The industry also shares some other efficiencies from the greater economies of scale, though they of course keep quite a bit to themselves.

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