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Fund Firms Cashing in Despite Move to Lower-Cost Funds

Industry fee revenue at record high, even though investors pay less for funds overall.

Asset management is often described as a scalable business. After all, the costs of managing a fund don't significantly increase when a fund goes from $1 billion to $2 billion in assets. In fact, funds spread their costs over more assets as funds grow, often leading to declines in expense ratios as assets increase.

Indeed, during the past decade, the asset-weighted expense ratio across all funds (including mutual funds and exchange-traded products, or ETPs, but excluding money market funds and funds of funds) has fallen to 0.64% from 0.87%, which is a decline of 27%. 

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