Morningstar Study Shows Fund Expense Ratios Declined in 2014, Investors Increasingly Seek Low-Cost Funds

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Morningstar, Inc.

Apr 23, 2015, 04:04 ET

CHICAGO, April 23, 2015 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, has released its latest study of fund fees, examining trends in expense ratios and investor preferences over the past 10 years through 2014. Investors are paying less for fund management, as most fund flows have gone into lower-cost funds, while increased assets under management are pushing overall industry fee revenue higher.

Key findings of the study include:

  • Investors are actively seeking lower fund management fees. During the past 10 years, 95 percent of fund flows have gone into funds in the lowest-cost quintile.
  • The asset-weighted expense ratio across all funds was 0.64 percent in 2014, down slightly from 0.65 percent in 2013 and significantly lower than 0.76 percent five years ago.
  • Investors continue to move away from load-based share classes to those that do not charge loads, which also tend to have lower expense ratios.
  • Firms that offer lineups with lower asset-weighted expense ratios—most notably Vanguard—have gained market share during the past five years.
  • While 63 percent of fund share classes and exchange-traded products examined by Morningstar reduced their expense ratios during the past five years, just 24 percent saw fees decrease more than 10 percent. Meanwhile, 21 percent of the share classes examined increased their fees.
  • Industry assets under management rose 143 percent over the past 10 years, pushing estimated industry fee revenue to an all-time high of $88 billion in 2014, up 78 percent from $50 billion 10 years ago, while the asset-weighted expense ratio declined 27 percent.

The full study is available here, and a summary is available in the April issue of Morningstar® FundInvestorSM or on Morningstar.com.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 15 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had more than $179 billion in assets under advisement and management as of March 31, 2015. The company has operations in 27 countries.

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SOURCE Morningstar, Inc.

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