In face of increasing competition, the ETF space and broader fund industry is expected to continue their internecine fee war, pushing investment costs closer and closer to zero.
According to PwC, management fees for traditional mutual funds will dip nearly a fifth by 2025, bringing the global asset-weighted average to 36 basis points from 44bp at the end of last year, the Financial Times reports.
The pressure on fund fees is attributed to increased pressure from investors for better value, along with heightened regulatory scrutiny.
Asset managers were only “beginning to catch up” to other mature industries where pricing strategies, like loyalty discounts and early bird deals, are in place, Olwyn Alexander, a partner at PwC, told FT.
“It is remarkable that standard-fee models have survived for so long, not evolving or changing significantly over time,” Alexander said.
ETF Competition to Intensify
Among the fund types, competition is expected to be most intense in the passive fund space where ETF managers are already locked in price war to see who will be the first to bring fees closer and closer to zero.