European Fund Fees Keep Falling as Investors Reward Lower-Cost Funds

European fund fees continued their downward trajectory in 2026, extending a trend that has reshaped the investment landscape over the past decade. While the shift from active to passive investing remains an important driver, competition now spans traditional mutual funds, index funds, ETFs, and an emerging cohort of active ETFs.

According to Morningstar's latest European Fund Fee Study, equal-weighted average fund fees fell to 1.06% in June 2026 from 1.30% a decade earlier, while asset-weighted fees declined to 0.75% from 1.04%. The study analyzed approximately 41,000 European open-end funds and ETFs across equity, fixed-income, and allocation categories from June 2016 through June 2026.

The findings reinforce a long-standing message for investors and asset managers alike: Fees remain one of the strongest predictors of future fund returns, and investors continue to reward lower-cost products with their assets.

Download the full European Fund Fee Study 2026 for a deeper analysis of fee trends across asset classes, countries, fund providers, as well as investor flows, one-off charges, and performance-based fees.

Fee compression remains one of the defining trends in European asset management. Across all funds included in the study, the equal-weighted average fee fell to 1.06% in June 2026, down from 1.08% in 2025 and 1.30% in 2016. The decline is even more pronounced when viewed through the lens of investor experience: Asset-weighted fees fell to 0.75%, compared with 0.78% a year earlier and 1.04% a decade ago.

The faster decline in asset-weighted fees suggests investors are actively directing capital toward lower-cost products. Market composition has shifted substantially as passive investing has continued its rise. In 2017, active funds accounted for 87% of assets in the study universe. By 2026, that share had fallen to 67%, while passive funds grew from 13% to 33% of assets.

This shift helps explain why the average investor is benefiting from fee reductions faster than industry pricing alone would suggest.

The decline in fees paid by investors can be seen across major asset classes.

The average fee paid by investors in active equity funds fell to 1.15% in 2026 from 1.35% a decade ago. Passive equity funds saw fees decline even further, reaching just 0.18%, down from 0.30% in 2016. Similar patterns emerged in fixed income, where active bond fund fees fell to 0.68% from 0.80%, while passive bond fund fees dropped to 0.15% from 0.25%.

These trends reflect increasing competition among passive providers and the continued migration of assets toward low-cost investment vehicles.

Allocation funds remain the most expensive major category and have experienced slower fee compression than equity or fixed-income products. Investor fees in allocation funds edged up slightly to 1.27% in 2026, although they remain below decade-ago levels. 

One reason is that allocation funds face less direct competition from passive alternatives than equity and bond funds, reducing pressure on pricing.

Perhaps the clearest finding in the report is that investors continue to demonstrate strong fee sensitivity.

Over the past decade, the cheapest quartile of active funds captured the bulk of net inflows. In many years, these lower-cost funds attracted assets even when higher-cost peers were experiencing outflows. The same pattern appeared in passive investing, where the cheapest quartile consistently led growth.

This behavior creates a powerful feedback loop. As investors direct new capital toward lower-cost products, providers face greater pressure to compete on fees.

Despite investor preference for lower-cost offerings, many higher-fee active funds continue to hold substantial assets. Nearly half of active equity and allocation fund assets remain invested in the two most expensive fee quartiles.

The report suggests that much of this asset base likely reflects legacy allocations rather than fresh investor demand. New money increasingly favors lower-cost options, while older investments remain concentrated in more expensive products.

Fee reductions are not occurring solely because existing funds are cutting prices. Another important factor is that newly launched products tend to be cheaper than those exiting the market.

In 2026, newly launched active funds carried average fees of 0.99%, compared with 1.17% for liquidated active funds. The same pattern existed among passive products, where newly launched funds averaged 0.21% versus 0.25% for liquidated funds.

As lower-cost products replace more expensive ones, average fees continue falling even without industrywide price cuts. This replacement effect has become one of the most important structural drivers of fee compression across Europe.

Competition is also intensifying from multiple directions. Traditional active funds now face pressure not only from passive products but increasingly from active ETFs, which are bringing lower-cost structures into actively managed strategies.

Averages can mask significant variation between countries.

The Netherlands and the UK remain Europe's lowest-cost active-fund markets, with average active fund fees of 0.70% and 0.84%, respectively. The study attributes these lower costs largely to competitive distribution markets and regulatory regimes that prohibit retail retrocessions.

Even after adjusting for estimated retrocession payments, the gap in average fees between regions remains wide. Investors in the most expensive markets (Germany, France, Luxembourg) pay 0.3–0.4 percentage points more per year than those in the cheapest (the Netherlands, the UK).

Differences persist in passive investing as well. The Netherlands, UK, and Switzerland rank among the lowest-cost passive markets, while Spain remains the most expensive, with average passive fund fees of 0.82%.

These findings underscore how regulation, distribution practices, and local market structures continue to influence the costs investors ultimately bear.

The study also highlights substantial variation among leading asset managers.

Among the largest active fund providers, Swedbank remains the lowest-cost firm, with average fees of 0.79%, followed by Pimco at 0.82%. At the opposite end of the spectrum, Union Investment carries average fees of 1.19%.

Some of the most notable change has occurred at BlackRock, which reduced average active-fund fees from 1.39% a decade ago to 0.93% in 2026.

In passive investing, fees across major providers increasingly cluster between 0.20% and 0.25%. Vanguard continues to stand out, however, with an average passive-fund fee of just 0.13%.

The trend illustrates how competition among providers continues lowering costs across the industry. In many cases, fund closures have played a significant role, with older, higher-cost products gradually disappearing and being replaced by cheaper alternatives.

The direction of travel remains clear: European fund fees continue to move lower.

Investor behavior, product innovation, and competitive pressure are working together to drive fee compression across both active and passive strategies. Investors consistently reward lower-cost funds with assets and flows, while asset managers continue launching products at increasingly competitive prices.

At the same time, fee differences across countries demonstrate that regulation and distribution structures remain important determinants of investor outcomes.

For asset managers, the message is straightforward. Cost competitiveness remains an increasingly important part of winning and retaining assets. For investors, the decade-long decline in fees continues to improve the odds of keeping more of their returns.

Explore how active ETFs are reshaping competition in European asset management and adding new pressure on fund fees.