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Morningstar Finds Investors Saved Nearly $9.8 Billion In Fund Fees In 2022
The annual U.S. Fund Fee Study reports record-low average expense ratio for mutual funds and ETFs, driven by heavy outflows from expensive funds CHICAGO, Aug.
About this update from Morningstar, Inc.
[{"type":"text","content":"The annual U.S. Fund Fee Study reports record-low average expense ratio for mutual funds and ETFs, driven by heavy outflows from expensive funds\nCHICAGO, Aug. 8, 2023 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today published its annual fund fee study, which evaluates trends in the cost of United States (U.S.) open-end mutual funds and exchange-traded funds (ETFs)1. The study found that the asset-weighted average expense ratio of U.S. funds fell to 0.37% in 2022 from 0.40% in 2021, saving investors an estimated $9.8 billion as a result.\n\"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.\"\nKey findings from the study include:\nThe 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 was 0.37%, compared with 0.91% 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 $1.1 trillion more than the remaining 80% of funds, as the cheapest 20% saw net inflows of $394 billion while the remaining 80% of funds shed $734 billion in outflows.For active funds, the asset-weighted average expense ratio fell to 0.59% in 2022 from 0.61% in 2021, driven mainly by large net outflows from expensive funds and share classes. For passive funds, the asset-weighted average expense ratio dropped to 0.12% in 2022 from 0.13% 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 versus 0.37% 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...