Morningstar noted that the most current average compares with 0.87% in 2001 and that the average expense ratio paid by fund investors has been dropping for more than 20 years.
The research company found that for active funds, the asset-weighted average expense ratio decreased from 0.63% in 2020 to 0.60% in 2021. Most of the adjustment was driven by significant net outflows from pricey share classes and funds, with inflows into less expensive ones also making a difference.
Even though it dropped to its lowest level ever in 2021, sustainable funds still charge investors a “greenium.” At the end of 2021, these funds’ asset-weighted average expense ratio was 0.55% compared to 0.39% for their traditional peers.
Investors continue to select low-cost funds, according to Morningstar.
The least costly 20% of funds experienced net inflows of $1.05 trillion in 2021, with the remaining 80% receiving inflows of $57 billion. This was the first year since 2013 that the more expensive funds saw combined inflows.
