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Fund Spy

Fund Fees Paid by Investors Continue to Decline

Investors have been voting with their feet for low-cost funds, bringing down average fees again in 2016.

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This is an excerpt from our recently released research paper on U.S. fund fees. The full paper is available here.

Morningstar's study of U.S. open-end mutual funds and exchange-traded funds finds that, on average, investors paid lower fund expenses in 2016 than ever before. The asset-weighted average expense ratio across funds (excluding money market funds and funds of funds) was 0.57% in 2016, down from 0.61% in 2015 and 0.65% three years ago. This decline stems from strong investor demand for lower-cost funds, principally passive funds and institutional share classes that carry lower fees. This is a positive trend, as mutual fund costs have a dollar-for-dollar impact on the returns investors ultimately realize.

Patricia Oey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.