Mutual funds, exchange-traded funds and even hedge funds have reduced the fees they charge clients in light of the weakened economy, according to Fund.com.
Some of the fee cuts are temporary measure aimed at attracting recession sales, but Fund.com believes the trend is likely to continue.
Now more than ever, the internet is making price comparison easy allowing investors to search for bargains whenever they shop.
Charles Schwab is leading the pack with aggressive price cuts, recently introducing a group of low-cost ETFs. In addition, Schwab is allowing investors to trade new ETFs for free, which Fund.com says is a bold stroke since investors typically pay standard brokerage commissions to buy and sell ETFs.
Hedge funds have also been reducing expense ratios. Typically, hedge funds have charged annual management fees of 2.0 per cent, with performance and incentive fees on top of that. Many clients, dissatisfied with the extra fees, have been negotiating lower costs, pushing the average annual fee to 1.63 per cent, according to consulting firm Preqin.
While mutual fund investors have little room to negotiate, many are benefiting from lower fees in the other investment vehicles. The average dollar invested in a domestic equity fund now faces an expense ratio of 0.78 per cent—five years ago, that number was 0.91 per cent, according to Morningstar. The decline is partially due to cuts at big funds, which have been reducing their expense ratios by 20 basis points on average.
Fund.com, through its AdvisorShares Investments subsidiary, is creating actively managed ETFs, such as the Dent Tactical ETF, to take advantage of the rapidly growing ETF business.
