The cost of mutual fund ownerships continued to fall again in 2005 to the lowest levels in 25 years, the Investment Company Institute announced. The decline was driven not only by lower fees but also by investors seeking out lower-cost funds.
"The latest data indicate that vigorous competition among fund providers is clearly benefiting investors," commented ICI Senior Economist Sean Collins, who authored the report, "Fees and Expenses of Mutual Funds, 2005."
Last year, investors in equity funds paid an average of 1.13% in fees and expenses, four basis points lower than in 2004. Fees and expenses on bond funds were 0.90% last year, a decline of two basis points.
The study also showed that 90% of investors' assets are in equity funds with below-average expense ratios. In fact, investors' new purchases of fund shares are increasingly going to very low-cost funds. Of the $136 billion in net new cash flow to equity funds last year, 30% went to funds with expense ratios of less than 0.50%.