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Rating:ICI Voice Starting to be Heard in Fee Debate Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, February 07, 2005

ICI Voice Starting to be Heard in Fee Debate

by: Sean Hanna, Editor in Chief

Barrels of ink have been spilled lamenting the high mutual fund fees paid by investors, but those fees are not as high as it appears. A Monday report by Dow Jones Newswires admits that investors "might be surprised to learn that most investors are actually paying quite a bit less" than they thought in fees.

The news service highlighted the fact that Lipper Inc. calculates the average dollar-weighted fee paid by fund investors at "a mere" 93.6 basis points compared to the unweighted average of 157.3 basis points for all equity funds.

The difference between a fund equal weighted average and an asset-weighted average has been pointed out by the fund industry through the ICI for years, but for the most part the message has been overlooked by mainstream media reporters.

This time the reporter quotes Lipper analyst Jeff Keil saying that the most popular funds "... definitely all have below-average expense ratios."

"Giving small funds presumably with a small amount of shareholders an equal weighting in the calculation ... doesn't make a lot of sense," Keil adds. "More assets equate to more shareholders, generally. If you look at the dollar-weighted average, you're giving someone an idea of what most shareholders are paying."

The article also credits mutual fund directors with having the sense to recognize the impact a fund's size has on its relative expenses. The article quotes Allan Mostoff, president of the Mutual Fund Directors Forum, in support of the assertion.

"There really is not one set way. [Directors] look at fee schedules, at absolute numbers, look at the effect of rates being paid as a result of asset size," says Mostoff. "They really try to get down to a comprehensive understanding of what the costs are."  

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