ICI Research Perspective: Trends in the Expenses and Fees of Mutual Funds, 2012

24 Pages Posted: 18 Apr 2013

See all articles by Emily Gallagher

Emily Gallagher

University of Colorado at Boulder - Department of Finance; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: April 11, 2013

Abstract

This study examines recent trends in the expenses and fees of mutual funds. Expense ratios of equity, bond, and hybrid funds declined in 2012 owing to reductions in the expense ratios of individual funds, an increase in the demand for index funds, and a continuing shift by investors in both actively managed and index funds toward lower-cost funds. Expense ratios of money market funds declined sharply as assets migrated toward lower-cost funds and funds continued to waive large portions of expenses. Waiving expenses helps offset the effects of the current low interest rate environment on a fund’s net yield. Expense ratios of target date mutual funds were 58 basis points in 2012, down from 67 basis points in 2008. Two factors likely played a role. First, assets in target date mutual funds have tripled since 2008, lowering fund expense ratios through economies of scale. Second, a greater concentration of assets in lower-cost target date mutual funds pushed down the average expenses of these funds.

Keywords: Mutual funds, target date funds, expenses, load fees

Suggested Citation

Gallagher, Emily, ICI Research Perspective: Trends in the Expenses and Fees of Mutual Funds, 2012 (April 11, 2013). Available at SSRN: https://ssrn.com/abstract=2251479 or http://dx.doi.org/10.2139/ssrn.2251479

Emily Gallagher (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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