Fund managers forego billions in fees in race to the bottom

Demand for the ‘cheapest of the cheap’ remains fierce, according to Morningstar

Asset managers had to forego billions in fees from US fund investors last year as exchange traded funds ate into revenues from mutual funds, research suggests. Morningstar’s annual US fund fee study indicates US investors saved nearly $3.4bn in fund expenses last year compared to the previous year as the average asset-weighted expense ratio edged down from 0.37 per cent to 0.36 per cent, continuing a multi-decade downward trend.

This near parity is only the case because it has unveiled several rounds of fee cuts, particularly in its mutual funds, in recent years, coinciding with its entry into the ETF sector. While the large-scale adoption of actively managed ETFs is relatively recent , the pressure towards ever lower fees is nothing new. Morningstar noted that demand for the “cheapest of the cheap” has been consistent.

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