Fund Fees Paid by Investors Continue to Decline

This is an excerpt from our recently released research paper on U.S. fund fees. The full paper is available here.

Morningstar's study of U.S. open-end mutual funds and exchange-traded funds finds that, on average, investors paid lower fund expenses in 2016 than ever before. The asset-weighted average expense ratio across funds (excluding money market funds and funds of funds) was 0.57% in 2016, down from 0.61% in 2015 and 0.65% three years ago. This decline stems from strong investor demand for lower-cost funds, principally passive funds and institutional share classes that carry lower fees. This is a positive trend, as mutual fund costs have a dollar-for-dollar impact on the returns investors ultimately realize.