2,830 Funds Lowered Fees In 04 to Median of 1.45%
January 9, 2006
As mutual funds continue to grow, more funds are charging lower fees to investors, and some industry watchers say it's about time, USA Today reports. In 2004, 2,830 mutual funds cut the fees they charged investors, representing an increase of 355% from 622 that cut fees in 2003, according to Lipper.
"It's like your doctor telling you he's going to start taking your blood pressure," said Roy Weitz, of industry watchdog FundAlarm.com. "That's good, but he should have been taking it all along."
The median fee charged by equity mutual funds also dropped in 2004 to 1.45% of assets, compared to 1.5% in 2003. During the same period, sector funds cut management expenses from 1.89% of assets in 2003 to 1.78% in 2004, according to Lipper.
In part, Lipper attributes the industry-wide drop in costs to the trading scandal of 2003. That year, giants Janus and Putnam Investments were charged with improper trading, and subsequently agreed to reduce fees as part of a settlement with New York Attorney General Eliot Spitzer. Breakpoints, mergers and pressure form investors may also have contributed to the industry's fee-trimming trend.
Morningstar Director of Fund Analysis Kunal Kapoor said that the falling fees are to be expected. "You've had the stock market doing well the past three years [and] asset flows doing well. You'd expect some expense reductions," he said.
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