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Rating:Fund Fees Decrease But Is It Enough? Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, September 16, 1999

Fund Fees Decrease But Is It Enough?

Reported by Hayley Green

Investors should have a lot more money to put into tech stocks lately as mutual fund fees have dropped 5.6% in 1998 to an average of 1.35% of assets, according to the Investment Company Institute.

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  • The cost of investing money in bond and money-market funds has also declined. Bond fund fees are 3.5% lower to an average of 1.09% and money market fund fees slid to 2.3% to an average of .42%.

    The drop is being partly attributed to the growth of low-cost index funds, which have recently attracted 40 cents of every new dollar invested in stock and bond mutual funds. The ICI also attributes the decrease to increased competition. Excluding index funds and institutional funds, which generally have lower costs, the decline for remaining stock funds over the period amounted to 32 percent.

    Similar past studies by the ICI have been criticized as skewed by a few of the largest fund companies, but the industry trade group says that dropping stock funds of the three largest fund complexes still resulted in a shareholder cost decline of 34 percent. Excluding funds from the three largest companies as well as index and institutional fund complexes, shareholder costs fell 27 percent over the 19-year period.

    When asked if the downward trend will continue into 1999, both Elizabeth Powell, vice president of public information at the ICI and John Collins, managing director of public information said it is impossible to predict what will happen in the future.

    Collins did say, "There are forces that work in both directions. Continuing competition between load and no-load pressures push for declines pressures in distribution fees. But there is equal pressure to push fees higher because of new services we don't know about yet."

    On the flip side of the coin, the Securities and Exchange Commission said its fact-finding investigation of the practices of mutual fund firms is continuing because it feels funds' commission costs haven't dropped, although individual investors pay less than ever to trade.

    The SEC is conducting a sweep -- consisting of interviews and examinations of about 25 large and small investment advisers and brokerage firms. It's expected to yield a report and possible recommendations for new SEC rules, The Wall Street Journal said. 

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