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Are Falling Fund Fees Too Much of a Good Thing?

Our research finds that fees are likely to remain as reliable a guide to future performance as any.

Key Takeaways

  • Fund fees continue to decline, a big win for investors.
  • The question is whether narrowing fee differences between funds will make fees less predictive of future performance than before.
  • We examined the rolling returns and fees of all U.S. equity funds over the period September 1998-August 2018.
  • We found that funds are performing more alike and fee differences are narrowing.
  • However, we find no evidence that fees are having less of an impact on performance as they decline; to the contrary, they appear to be more significant to performance than before.
  • This argues for continuing to weigh fees heavily when assessing funds.