As Judgement Day grows closer for funds measured by Morningstar — an update to its rating methodology that considers fund costs is set for an Oct. 31 rollout — a recent U.S. Fund Flows report highlights this trend: Money is moving into the lowest cost funds in a big way.
Overall, long-term funds saw inflows of $39.9 billion in September after open-end funds and ETFs saw combined outflows of close to $16 billion in August. When flows were measured by fee levels, “the entirety of third-quarter long-term fund flows went to the cheapest decile of funds,” the report states.
“As Morningstar has emphasized in its research and commentary, when it comes to performance, it is the cost rather than fund structure that makes a difference over the long term. This is a message that investors have taken to heart when flows are measured against fund expenses,” states Tom Lauricella, Morningstar editor for professional audiences, in the report.