Released on June 8th, an annual study examining trends in open-end mutual funds and exchange-trade funds found that the asset-weighted average expense ratio plummeted to 0.45% in 2019, slicing funds and ETFs nearly in half over the last two decades. The 6% year-over-year drop is the third greatest recorded dating back to 1991, Morningstar observed. The majority of flows into these low-cost funds has been funneled into index mutual funds and exchange-traded funds, driven by a multitude of factors including the fluctuations in the financial advice industry, shifting investor preferences, and the climb of TDFs as the default investment choice in retirement plans.
Generally, investors saved approximately $6 billion in fund fees last year. “Investors are increasingly aware of the importance of minimizing investment costs, which has led them towards lower-cost funds and share classes,” says Ben Johnson, Morningstar’s director of ETF and passive strategies research, and coauthor of the report. “There has also been intensifying competition among asset managers, who have cut fees to appeal to cost-conscious investors.”
To read more of the 2019 U.S. Fund Fee Study, click here.
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