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Morningstar Finds Falling Fees Saved Investors $6.2 Billion in 2020
The annual U.S. Fund Fee Study reports sustainable funds' fees have fallen 27% over the past decade as low-cost, sustainable passive investments have become
About this update from Morningstar, Inc.
[{"type":"text","content":"The annual U.S. Fund Fee Study reports sustainable funds' fees have fallen 27% over the past decade as low-cost, sustainable passive investments have become available\n\n\nCHICAGO, Aug. 25, 2021 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its annual fund fee study, which evaluates trends in the cost of U.S. open-end mutual funds and exchange-traded funds (ETFs)1. The study found that the average expense ratio paid by fund investors is half of what it was two decades ago. Between 2000 and 2020, the asset-weighted average fee fell to 0.41% from 0.93%. Investors have saved billions as a result. \nMuch of the decline documented in the asset-weighted fees paid by investors can be attributed to the fact that they've been allocating more of their investment dollars to low-cost index mutual funds and ETFs and that those same funds have been slashing their expense ratios.\n\"The fact that fees have been reduced to either nothing or next to nothing among broad-based index funds is only natural,\" said Ben Johnson, Morningstar's director of ETF and passive strategies research. \"Given these funds' commodity-like nature, it seems inevitable that their prices would be pushed down to the marginal cost of managing them and that assets would consolidate in the hands of a few large-scale manufacturers.\"\nKey Takeaways \nThe asset-weighted average expense ratio fell to 0.41% in 2020 from 0.44% in 2019. As a result, we estimate investors saved nearly $6.2 billion in fund expenses last year. The asset-weighted average expense ratio for active funds fell to 0.62% in 2020 from 0.65% in 2019, driven mainly by large net outflows from expensive funds and share classes and, to a lesser extent, inflows to cheaper ones. The asset-weighted average expense ratio for passive funds fell to 0.12% in 2020 from 0.13% in 2019, thanks to steady flows into the lowest-cost funds. Investors in sustainable funds are paying a \"greenium\" relative to investors in conventional funds. This is evidenced by these funds' higher asset-weighted expense ratio, which stood at 0.61% at the end of 2020 versus 0.41% for their traditional peers. However, this \"greenium\" has been shrinking. Sustainable funds' equal-weighted average fee has fallen 27%, while the asset-weighted average fee paid by investors...