Morningstar: European investors are paying lower fees on average than ever before

Morningstar: European investors are paying lower fees on average than ever before

7 december 2020

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Morningstar today published its first European Fee Study that shows European investors are paying lower expenses on average than ever before.

The research analyses trends in fees for a group of equity and fixed income Morningstar Categories during the period from 2013 to 2020. These include 10 equity categories, mixing broad global and single country exposures and two fixed income categories. The selected categories are core market exposures that make up a large proportion of the holdings that the average European investor would have in a diversified portfolio.

This decline in fees is a strong positive for investors, as fees are a reliable predictor of future returns. Low-cost funds generally have greater odds of surviving and outperforming their more-expensive peers.

The European Fee Study uses the KIID ongoing charge from 2013 through October 2020 as the common measure for fund fees. All calculations have been carried out at the share class level for open-ended active and passive funds and at the fund level for exchange-traded-funds.   

Jose Garcia-Zarate, Associate Director, Manager Research, Passive Strategies, comments: “Investors were paying lower fund expenses in October 2020 than ever before. Our study of found the asset-weighted average ongoing charge across funds was 0.69% in October 2020, a 31% decline from 2013. Active and passive funds saw declines in fees, with passive funds leading the charge.

“The decline in fees is a big positive for investors because fees compound over time and diminish returns. The only certainty when investing is that investors must pay fees every year. The easiest way to improve one's chances of maximising returns over the long-term is to keep a tight rein on costs.”

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