May 14 U.S. stock fund expenses fell 4 percent
last year while the sponsors of money market funds waived $5.8
billion in fees to shield investors from negative returns, an
investment industry trade group said on Wednesday.
Money market funds have waived nearly $24 billion in
expenses over the past five years, according to a study by the
Washington D.C.-based Investment Company Institute (ICI).
Yields on money funds are next to nothing. They track
short-term interest rates, which are skipping along rock bottom
as the U.S. Federal Reserve tries to stimulate the economy with
Money market fund advisers and their distributors pay for
waivers, forgoing profits and bearing nearly all of the expense
of running the funds. Waivers increased by $1 billion to $5.8
billion in 2013, ICI said.
But for stock funds, competition and an expansion of assets
have helped lower equity expenses as economies of scale worked
in favor of investors. Assets in stock mutual funds surged 31
percent to $7.76 trillion in 2013 from year-earlier levels. That
reflected net deposits in the funds by investors and a strong
stock market performance.
The average expense ratio that investors paid for stock
mutual funds dropped to 0.74 percent of net assets, from 0.77
percent in 2012, ICI said. The expense ratios of hybrid funds,
bond funds and target-date funds were largely unchanged.
"This study also shows that the average expenses of both
actively-managed funds and index equity funds have been trending
downward for more than a decade," said Sean Collins, ICI's
senior director of industry and financial analysis.
Indeed, the average expense ratio for an actively managed
fund has dropped to 0.89 percent from 1.10 percent over the past
10 years. In an even sharper decline, the average index fund's
expense ratio has been cut by more than half to 0.12 percent
from 0.25 percent in 2003, Collins said.
The overall decline in average equity fund expenses marked
the fourth straight year of reduction, after an increase of 4
basis points in 2009 in the wake of the financial crisis, ICI
said. Fund expenses cover investment management fees, record
keeping, compliance and other administrative tasks, and are paid
from a fund's assets.
Among equity funds, large capitalization blend funds had an
average expense ratio of 0.35 percent. In contrast, emerging
market funds cost, on average, 1.08 percent, ICI said.
After falling 1 basis point in each of the previous three
years, the average bond fund expense ratio did not change in
2013, at 0.61 percent of net assets, ICI said.
(Reporting By Tim McLaughlin; Editing by Nick Zieminski)