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6 Medalist Funds Just Got Cheaper

When good funds' costs drop, you should pay attention.

This article was originally published in the June 2017 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

The typical investor 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 0.68% five years ago, according to a report by Morningstar senior analyst Patricia Oey. This figure is the asset-weighted average across equity, fixed-income, balanced, and alternative funds, which include almost 24,000 share classes (load, institutional, retirement, other/no-load, and exchange-traded fund). This decline stems from investor demand for cheaper passive funds (index funds and ETFs) and strong flows into institutional share classes, which carry lower fees. Vanguard also contributed to average fee declines, as its low-cost passive funds continue to attract large flows.

This decline is a positive trend for investors, as mutual fund costs have a direct impact on the future value of investors' portfolios. Although most fee declines were small, some have been quite significant. Those at funds we already considered worthy of Morningstar Medalist status are particularly noteworthy.

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About the Author

Russel Kinnel

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Russel Kinnel is director of ratings, manager research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He heads the North American Medalist Rating Committee, which vets the Morningstar Medalist Rating™ for funds. He is the editor of Morningstar FundInvestor, a monthly newsletter, and has published a number of prominent studies of the fund industry covering subjects such as manager investment, expenses, and investor returns.

Since joining Morningstar in 1994, Kinnel has analyzed virtually every type of fund and has covered the most prominent fund families, including Fidelity, T. Rowe Price, and Vanguard. He has led studies on the predictive power of fund data and helped develop the Morningstar Rating for funds and the Morningstar Style Box methodology. He was co-author of the company's first book, Morningstar Guide to Mutual Funds: 5-Star Strategies for Success (Wiley, 2003), and was author of the book Fund Spy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform, published in 2009.

Kinnel holds a bachelor's degree in economics and journalism from the University of Wisconsin.

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