Average expense ratios for stock and bond mutual funds continue to decline in 2022, according to a Thursday release from the Investment Company Institute, the Washington-based global association representing regulated investment funds.
Specifically, the average expense ratio for equity mutual funds fell to 0.44% in 2022 from 0.47% in 2021, while the average expense ratio for bond mutual funds dropped to 0.37% in 2022 from 0.39% in 2021.
ICI also noted in the release that the average expense ratio for equity mutual funds has plunged by 58% between 1996 to 2022, while the average bond mutual fund expense ratio has decreased 56% over that period.
In addition, the average expense ratio for actively managed equity mutual funds fell to 0.66% in 2022 from 0.68% in 2021, while the average expense ratio for index equity mutual funds slipped to 0.05% in 2022 from 0.06% in 2021.
Similarly, the average expense ratio for actively managed bonds mutual funds fell to 0.44% in 2022 from 0.46% in 2021, while the average expense ratio for index bond mutual funds slipped to 0.05% in 2022 from 0.06% in 2021.
Investor interest in lower-cost funds has helped fuel these trends, ICI said in the release.
"The continued decline in average equity and bond mutual fund expense ratios partly reflects the demand for no-load funds," said Shelly Antoniewicz, ICI's senior director of industry and financial analysis, in the release. "Gross sales of no-load funds without 12b-1 fees have nearly doubled since 2000, and now make up the vast majority of long-term mutual fund gross sales."
Indeed, ICI data showed that in 2022, 91% of long-term mutual fund gross sales went to no-load mutual funds without 12b-1 fees, up from 46% in 2000.
This shift, ICI explained in the release, was due to "more mutual fund investors paying for advice and assistance directly out of pocket rather than indirectly through 12b-1 fees; in addition to the widespread use of retirement accounts, which often invest in institutional no-load share classes."
According to the SEC, 12b-1 fees allow mutual fund advisers to "make payments from fund assets for the costs of marketing and distribution of fund shares."
