Mutual Fund and ETF Fees Fall to Record Lows: Morningstar

Vanguard’s fees continued to be the lowest overall — 0.10% for its average asset-weighted expense ratio — followed by State Street at 0.16% and BlackRock’s iShares at 0.25%.

Vanguard also saw the biggest decline in the asset-weighted average fee among 10 of the largest fund families, as measured by total AUM. Its fees fell a cumulative 25% over the past three years ended 2017, while iShares’ fees fell 19% and Fidelity’s dropped 14%.

Fidelity, however, showed the biggest year-over-year fee decline in 2017 — a 10% decline to 0.53%, due primarily to performance-related fees on many funds. Fidelity also introduced more than 80 lower-cost share classes in the past two years and cut fees on 14 index funds in 2017 but those cuts are not reflected in the Morningstar study, which based its fee data on fund companies’ annual reports.

(Related: Fidelity Files for No-Fee International Index Fund, Cuts Other Fees)

Fidelity, along with BlackRock’s iShares and Schwab have aggressively cut fees for core broad index funds in recent years.

Fund companies are also reducing asset-weighted fees by launching strategic beta funds, which act like a cross between active and passive strategies by focusing on specific factors like growth, value or or others not market-cap weighted. In 2017, the average asset-weighted fee for U.S. equity strategic beta funds was 0.18%, compared with 0.09% for traditional U.S. index funds and 0.73% for active U.S. equity funds.

(Related: Investors Have ‘Given Up’ on Active US Stock Funds: Morningstar)

As a result of all these developments, most U.S. investors now own low-priced funds, which Morningstar defines as funds with low or below average fee levels within their categories. Such funds account for 83% of all mutual funds and ETFs, according to Morningstar.