M*: Expense Ratios Are Falling

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stratton
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M*: Expense Ratios Are Falling

Post by stratton » Mon May 02, 2011 6:48 pm

Expense Ratios Are Falling
The data from 2010 expense ratios are encouraging thanks to a big spike in assets. Fees fell significantly in 2010 and are now lower than they have ever been. If rallying market values seem like an old story, they are. There's a significant lag in expense ratio reporting. The figures for 2010 came out in February and March 2011. Moreover, the 2010 figures themselves generally cover the fiscal year that began in November 2009 and ended Oct. 31, 2010. Thus, the numbers we're looking at today reflect information from as far back as 18 months ago.

Chart at the link with 21 years history of average ER for US, Intl stocks and taxable and muni bonds.

Paul
...and then Buffy staked Edward. The end.

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Boglenaut
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Post by Boglenaut » Sun May 08, 2011 9:39 pm

Interesting. What's scary is those are weighted averages by assets. They are going lower, but still high considering improvements in technology and asset volumes.

My personal average well below that.

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stratton
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Post by stratton » Sun May 08, 2011 9:42 pm

Boglenaut wrote:Interesting. What's scary is those are weighted averages by assets. They are going lower, but still high considering improvements in technology and asset volumes.

My personal average well below that.

I wonder if ERs have really fallen if you removed Vanguard from the averages?

Vanguard has grown so much their AUM might be enough to tip the numbers.

Paul
...and then Buffy staked Edward. The end.

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Boglenaut
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Post by Boglenaut » Sun May 08, 2011 9:48 pm

stratton wrote:
Boglenaut wrote:Interesting. What's scary is those are weighted averages by assets. They are going lower, but still high considering improvements in technology and asset volumes.

My personal average well below that.

I wonder if ERs have really fallen if you removed Vanguard from the averages?

Vanguard has grown so much their AUM might be enough to tip the numbers.

Paul


That's possible. Vanguards recent changes helped a lot.

Also ETF's and collective trusts are both gaining assets and have lower ER's than traditional mutual funds. I believe those were excluded from the study, right?

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stratton
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Post by stratton » Sun May 08, 2011 10:21 pm

For this study as in years past, we asset-weighted expenses to come up with what the average investor is paying. In addition, we excluded money markets, exchange-traded funds, and closed-end funds. All open-end fund share classes were included. In the accompanying table, you'll see that we broke fees down by asset class and rolled them up for an overall figure. Some fees that you might pay for your funds are not included in expense ratios, such as front-end loads, wrap fees, and redemption fees.

Title of the chart: Asset-Weighted and Average Expense Ratios, Broad Groups--Excludes Load-Waive Shares

Paul
...and then Buffy staked Edward. The end.

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RaleighStClaire
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Post by RaleighStClaire » Mon May 09, 2011 7:34 am

Boglenaut wrote:
My personal average well below that.


I would hope that everyone that participates on this forum has an average well below this as well :)
Where's that red one gonna go?

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Post by pkcrafter » Mon May 09, 2011 8:07 pm

With more and more investment products (MFs and ETFs) available costs must come down for managers to have any hope of generating alpha. With more active products and managers, the search for alpha gets harder and harder--too many managers looking for small inefficiencies--and so the only other way to gain advantage is to trim costs (profits). The reasoning behind this is funds hope to stand-out and attract more money to make up the forfeiture.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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