Morningstar’s 2019 annual U.S. Fund Fee Study reports that investors paid about 3 basis points less in 2018 than they did in 2017 in investment management fees. In dollar value, the researchers estimated that the difference equated to about $5.5 billion. Despite the overall decline in management fees, the study shows that investors are paying about 4.5 times more for active funds than they are for passive, the widest gap since 2000.
Much of the decline can be attributed to market pressure on active and passive funds alike to attract assets through lower fees. However, a look at fees on an asset-weighted average basis suggests that increased investor awareness has also played a part. A look through this lens shows that the active fund fees fell 9 basis points between 2015 and the end of 2018 as investors shifted to lower-cost funds or share classes. Passive fund fees fell 4 basis points over that period.
Also of note in the report was an analysis of asset flows by fee quintiles. The bottom 20% of funds by fees, or the least expensive funds, saw net inflows of $605 billion, while the remaining 80% of funds had net outflows of $478 billion.