Due to the intensifying fee wars, the average asset-weight expense ratio of U.S. equity ETFs has slipped by 10 basis points over the past decade to a new low of 21 basis points at the end of 2017. On the other hand, despite similar fee cuts over the past decade, the average mutual fund still costs over twice that of ETFs, according to the Investment Company Institute.
JPMorgan’s analysts calculate that the funds in the lowest decile by expense ratio, or those with an expense ratio of 15 bps or below, have attracted three-quarters of all net U.S. ETF asset inflows over the past year.
“Cost is not the only thing that matters, but it is a dominant factor,” Shelly Antoniewicz, senior director of financial and industry analysis at the ICI, told the Financial Times. “Even within the index industry things are ultra-competitive now.”
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