Mutual Fund and ETF Fees Hit Near-Historic Lows in 2025
Event summary
- Average expense ratios for equity mutual funds remained unchanged at 0.40% in 2025, while bond mutual funds decreased by 2 basis points to 0.36%.
- Index equity ETF fees stayed flat at 0.14%, and index bond ETFs dropped 1 basis point to 0.09%.
- Money market fund expense ratios rose 1 basis point to 0.24% as expense waivers were reduced.
- The decline in fees reflects 29 years of competition and economies of scale in the fund industry.
The big picture
The long-term decline in fund expense ratios underscores intense competition and investor demand for lower-cost investment options. As assets under management grow and new entrants expand the marketplace, firms are compelled to reduce costs, reshaping the industry's profitability dynamics. This trend highlights the shifting balance between active and passive management strategies.
What we're watching
- Pricing Pressure
- How sustained fee compression will impact profitability for fund managers.
- Investor Behavior
- Whether lower fees will continue to drive asset flows into passive investment products.
- Regulatory Scrutiny
- The pace at which regulators may intervene if fee reductions lead to reduced service quality.
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