Biggest decline in fees: U.S. equity funds
Average fees on U.S. equity funds fell 17 percent from 2013 to 2016, the largest drop across the seven asset class categories Morningstar tracked. Some 41 percent of all assets in U.S. equity funds are now in passive funds.
Only category to see fees rise: alternative funds
These funds, which deploy a host of complicated investing strategies, were alone in seeing average fees rise, to 1.34 percent last year from 1.27 percent in 2013. One reason for the increase is performance chasing by investors, which swelled the assets of some of the higher-performing—and higher-fee—funds. That gave them more weight in the calculation of asset-weighted average fees. "Expensive active funds, such as Marketfield (whose institutional share class charges 1.56%) and Gotham Absolute Return (2.20%), enjoyed large flows following a year of strong performance," the Morningstar report said.
This means war
Thanks to the price war among the fund companies, the average expense ratio on ETFs was 0.24 percent last year. That's down from an already low 0.29 percent three years before.
The lesson for investors: Expense ratio claims are relative. It literally pays to scrutinize "below-average" fees.
This article was provided by Bloomberg News.