Mutual fund fees could be increasing next year, and it hardly seems like a good way to bring back investors who have left in favor of exchange traded funds (ETFs).
After capital gains distributions and underperformance, will this bring back lost assets?
Analysts are slating stock funds for an average increase in expense ratios of .05% to .1%, while bond funds could go up .01% to .02%. Assets have fallen this year, further putting on the pressure, and some funds that operate break points below that level could increase management fees as well, reports Sue Asci for Investment News.
Increase in expense ratios will typically not be the best selling point in an arena where fund firms are vying for more investors. Average equity fund returns are down 40% with record outflows of $48 billion in September and $69 billion in October.
Fixed costs have also taken a good chunk out on expense ratios, which include trading, accounting, legal, audit and other service fees. Investors are sometimes not even aware of the rising costs that funds may already be incurring as a result of fee increases.
While investors are looking at the performance, advisors care about percentage point increases after losing more than the percent increase in the market, in which case they may look to ETFs.
Fee increases are expected to come first from small fund firms that are struggling with assets while the larger fund companies have the financial stability to not raise fees as quickly.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.