The average expense ratio of stock funds rose slightly in 2009, by two basis points to 86 BPS, but total fees and expenses, including load fees paid by investors remained largely unchanged on an asset-weighted basis in 2009, the Investment Company Institute said.
Rising expense ratios of stock funds, attributable in significant part to the effects of the stock market downturn, were offset by a decline in sales loads. In 2009, sales loads averaged 5.3%; however, investors actually paid only 1%, thanks to discounts and fee waivers.
“Mutual fund fees and expenses have declined by half since 1990,”said ICI Senior Director of Industry and Financial Analysis Sean Collins. “While expense ratios for long-term mutual funds rose slightly last year, this increase, like the increase in expense ratios during the stock market downturn in the early 2000s, seems likely to be temporary.”
The study found that in total, stock fund investors on average paid 99 basis points in 2009, the same as in 2008. Total bond fund fees also remained unchanged, at 75 basis points. Funds-of-funds, which include target-date funds, averaged 91 basis points in expense ratios, falling one point from the year before and reflecting the fourth year of declines.
Bond fund expense ratios rose two basis points to 65 BPS, and total money market fees and expenses fell an average of four points to 34 BPS. The ICI attributed the rather sizeable decline in money fund fees to an increase in the market share of institutional money market funds, a move by retail and institutional investors toward lower-cost funds, and an increase in fee waivers by some retail funds as a result of the low interest rate environment.
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