The long-term trend of declining fund fees hit a plateau in 2024, with the asset-weighted average fund fee dropping just two basis points, according to Morningstar’s 2024 Fund Fee Study. Still, that drop amounted to a $5.9 billion in savings for investors.
Cumulatively, between 2005 and 2024, the asset-weighted average fund fee has dropped from 0.83% to 0.34%, according to the study.
ETFs continue to maintain their fee advantage relative to mutual funds, although the gap narrowed in 2024. Overall, investors paid an average 0.16% fee on ETFs in 2024, unchanged vs. 2023. For mutual funds, the average fees were around 0.42%, down two basis points from 2023.
One reason for this is that since 2015, the equal-weighted average fee for new ETFs rose by 11% while new mutual funds got 22% cheaper. This has been driven in part by the fact that ETF issuers have been launching more active ETFs in recent years, which tend to have higher fees than passive ETFs.
By strategy, “the percentage of actively managed funds that reported lower annual expenses increased to 35% in 2024 from 24% in 2023. Only 22% of passive funds cut their fee in 2024, but that was up from 13% in 2023,” according to the report.
Investors continue to be conscious of fees when selecting funds. Last year, the gap in flows between the cheapest 20% of funds and the most expensive 80% was almost $1.2 trillion—the second largest gap in the last two decades, according to Morningstar.
Vanguard maintained an advantage on the fee front, with average fees of 0.07%. That doesn’t factor in the additional fee reductions Vanguard announced in late January.