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M*: U.S. Fund Fee Study

TedTed
in Fund Discussions
FYI: Investors paid less to own funds in 2018 than ever before. Our study of U.S. open-end mutual funds and exchange-traded funds found the asset-weighted average expense ratio was 0.48% in 2018, down from 0.51% in 2017. We estimate that investors saved roughly $5.5 billion in fund expenses last year thanks to this 6% fee decline, which is the second-largest year-over-year decline we have recorded since we began tracking the trend in asset-weighted average fees in 2000. The asset-weighted average expense ratio has fallen every year since 2000. Investors are paying roughly half as much to own funds as they were in the year 2000, when the asset-weighted average fee stood at 0.93%; they're paying 40% less than they did a decade ago and about 26% less than they did five years ago. The asset-weighted average expense ratio of passive funds was 0.15% in 2018 (versus 0.25% a decade ago) compared with 0.67% for active funds (0.86% in 2008). This means active-fund investors are paying about 4.5 times more than passive-fund investors on each dollar, the widest disparity since 2000
Regards,
Ted
https://www.morningstar.com/content/dam/marketing/shared/pdfs/Research/USFundFeeStudyApr2019.pdf?cid=EMQ_&utm_source=eloqua&utm_medium=email&utm_campaign=&utm_content=17040

Comments

  • hank
    edited May 2019
    “With so much pressure on fees, the industry has been introducing more funds that act almost as a hybrid of index and actively managed funds — smart-beta funds. These funds track indexes, but they’re more fine-tuned and follow strategies similar to ones active managers use. For example, low-volatility funds track indexes that include only stocks with smaller swings in price than the broad market. Others follow indexes that hold only stocks with prices that have the highest momentum.
    -

    Let me get this right: Instead of investing in just one index, these “smart beta” funds trade in and out of several different indexes all the time? “ A rolling stone gathers no moss” approach to investing. I’d imagine you could fine-tune a computer to do this for you without ever having to show up at the office - or even look under the hood.

    All the different computers at “smart beta” shops can continually try to outgun one another. Every day. All day long. Low fees. Just need enough money to cover the light bill. And at year’s end the computers can compose the annual report(s) and mail them off to clients.

    What could possibly go wrong here?
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