Even with the falling fees, fund issuers are not hurting because assets under management are surging.
“However, much of the increased economies of scale are going to the fund industry rather than investors. Assets under management have risen faster than fees have fallen,” according to Morningstar.
The global ETF industry is closing in on $3 trillion in assets under management, having finished the first quarter with $2.92 trillion in assets, according to ETF research firm ETFGI. U.S. ETF providers had a combined $2.09 trillion in assets at the end of the first quarter. [ETFGI: ETF Assets hit a Record in Q1]
Passive funds are driving fund industry growth.
“Passive funds focused on U.S. stocks have attracted $671 billion of inflows during the past 10 years, compared with outflows of $731 billion for active U.S. equity funds,” according to Rawson. “Passive funds now account for 28% of the total assets in the universe we’ve examined, up from 13% in 2004.”
Chart Courtesy: Morningstar