The asset-weighted average expense ratio for U.S.-listed exchange-traded funds dropped 2 basis points in 2022 to 0.17% from 0.19% in 2021, according to Morningstar data.
The drop marks a 9.5% year-over-year decline, according to Bryan Armour, director of passive strategies research for North America at Morningstar Research Services, a Morningstar subsidiary, who said the percentage decline was calculated based on unrounded figures.
Mr. Armour cited two factors as driving a reduction in fees for both U.S.-listed ETFs as well as U.S. mutual funds in 2022 vs. the prior year.
"No. 1, inflows are really going into the cheapest 5% of funds," he said in an interview Tuesday. "The second side of the coin is that the more expensive funds are seeing significant outflows."
On Tuesday, Morningstar published its annual fund fee study, which evaluates trends in the cost of U.S. open-end mutual funds and ETFs. The 2022 U.S. Fund Fee Study, which didn't break out fee data for ETFs alone, found that the asset-weighted average expense ratio of all U.S. open-end mutual funds and ETFs fell to 0.37% in 2022, down from 0.4% in 2021.
"As a result, we estimate investors saved nearly $9.8 billion in fund expenses last year," Morningstar's study said.
The study, which Mr. Armour co-authored, said that in 2022, "the gap in flows for cheap and expensive funds grew into a chasm." The cheapest 20% of funds had net inflows of $394 billion last year, while the remaining 80% suffered $734 billion in net outflows, the study said.
And, of the $394 billion that flowed into the cheapest 20% of all funds and share classes in 2022, "all of it went into the cheapest of the cheap," the study said. In 2022, $519 billion flowed into the least expensive 5% of all funds, it said.
That study also said that at 0.37% in 2022, the asset-weighted average expense ratio of U.S. funds was less than half of what it was two decades ago. In 2002, the asset-weighted average fee was 0.91%, Morningstar's study said.
"Investors paid lower fund expenses in 2022 than ever before," the study said.