Popularity of index funds and ETFs driving down average costs: Morningstar

Average net expense of all mutual funds drops to 0.57%.
MAY 23, 2017

As assets continue to flow into index mutual funds, ETFs and institutional share classes, investors paid less in fund expenses in 2016 than ever before, said Morningstar, Inc., in its annual fund fee study. The asset-weighted average net expense ratio of all U.S. funds was 0.57% in 2016, down from 0.61% in 2015 and 0.65% three years ago. The asset-weighted average expense ratio was 0.17% for passive funds and 0.75% for active funds, Morningstar said in a release. "Investors have been voting with their feet for low-cost funds," said Patricia Oey, senior manager research analyst for Morningstar. (More: Low volatility funds live up to their name as market falls) The research firm said that while outflows from active funds reached a cumulative $586 billion in 2015 and 2016, they were all from expensive active funds. "Low-cost active funds saw positive, albeit small, inflows of $41 billion over the same time period," Ms. Oey said. U.S. equity funds have seen the biggest migration to passive from active funds, Morningstar said, with the former drawing in $458 billion of inflows and the latter experiencing $525 billion of outflows over the past three years. During the same time period, U.S. equity funds' asset-weighted average fees fell a cumulative 17% to 0.5%, the largest change of any asset class. Among fund families, Vanguard has the lowest asset-weighted average expense ratio at 0.11%, followed by SPDR State Street Global Advisors at 0.19% and Dimensional Fund Advisors at 0.36%. During the past three years, Vanguard's asset-weighted average fee declined 21%, the greatest decline among the 10 largest fund providers. (More: Best- and worst-performing equity mutual funds)

Latest News

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.