Morningstar Finds Investors Saved Nearly $9.8 Billion In Fund Fees In 2022
- The asset-weighted average expense ratio of U.S. open-end mutual funds and ETFs has been falling for over two decades, indicating a positive trend for investors.
- Investors saved an estimated $9.8 billion in 2022 due to the decrease in average expense ratio, demonstrating a significant financial benefit.
- The study highlights the growing gap in flows between cheap and expensive funds, with the cheapest quintile of funds pulling in over $1.1 trillion more than the remaining 80% of funds, indicating a shift towards lower-cost funds.
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The annual
"We saw substantial assets wiped from expensive funds in 2022 as investors poured their money into lower-cost funds to minimize investment costs," said Bryan Armour, Morningstar's director of passive strategies research. "Asset managers have responded to this trend by cutting fees to vie for market share, and the end result is a win for investors."
Key findings from the study include:
- The average expense ratio paid by fund investors has been falling for over two decades. In 2022, the asset-weighted average expense ratio of
U.S. open-end mutual funds and ETFs was0.37% , compared with0.91% in 2002. - In 2022, the gap in flows for cheap and expensive funds grew into a chasm. For the first time since 2017, the cheapest quintile of funds pulled in over
more than the remaining$1.1 trillion 80% of funds, as the cheapest20% saw net inflows of while the remaining$394 billion 80% of funds shed in outflows.$734 billion - For active funds, the asset-weighted average expense ratio fell to
0.59% in 2022 from0.61% in 2021, driven mainly by large net outflows from expensive funds and share classes. For passive funds, the asset-weighted average expense ratio dropped to0.12% in 2022 from0.13% a year earlier. - Investors in sustainable funds are paying a "greenium" relative to investors in conventional funds. This is evidenced by these funds' higher asset-weighted average expense ratio, which stood at
0.50% at the end of 2022 versus0.37% for their traditional peers. - Strategic-beta funds are an alternative to higher-cost actively managed funds. In 2022, the asset-weighted average fee for strategic-beta funds was
0.18% , higher than the figure for traditional index funds (0.12% ) but significantly lower than for active funds (0.59% ). - Although some of its competition continues to gain ground, Vanguard still claims the lowest asset-weighted average expense ratio among asset managers, which was
0.08% in 2022.
The 2022 U.S. Fund Fee Study is available here. An article on Morningstar.com, which summarizes key findings and trends, is available here.
The
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1 The study excludes money market funds and funds of funds.
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