• Investors plowed money into cheap index ETFs amid recent market turbulence.
If sturdy inflows continue, the average fee fund investors pay should decline further in 2025.
• Vanguard, already the low-cost leader, slashed fees on 168 share classes in February 2025,
saving its investors an estimated $350 million just this year.
• ETFs remain far cheaper than mutual funds, on average, but the gap is narrowing.
• New ETFs are more expensive than they used to be.
This is due to the emergence of higher-cost investment strategies relatively new to the ETf wrapper.
"Given the intense competition among this low-margin cohort, there’s been a subtle, or not-so-subtle,
push from firms into more complicated, and more expensive, investment strategies.
Investors are slowly catching on, too.""These strategies, which include options-based ETFs, public/private vehicles like interval funds,
and other new developments, charge high fees compared with the cheap index funds investors
have historically preferred. Assets in these emerging products are growing but they still represent
a small piece of the pie. Some firms are trying to expedite that growth."https://www.morningstar.com/funds/4-fund-fee-trends-watch-2025
Comments
Additional fee data to 12/31/24 can also be found in ICI Fact Book, 2025, Ch 6.
https://www.icifactbook.org/pdf/2025-factbook-ch6.pdf