Morningstar Research Examines Trend of Fund Expenses in Europe

London - 17 August 2016

Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today released new research that reviews the expenses paid by fund investors in Europe and finds that, overall, the asset-weighted ongoing charge for the European fund universe has fallen to 1 per cent, down from 1.09 percent in 2013. However, investors now pay more in nominal values than in 2013, with the increase in managed assets more than offsetting the drop in ongoing charge. The research paper, European Fund Expenses are Decreasing in Percentage, offers detailed expense analysis of some 54,000 share classes available to investors in Europe.

Key findings include:

  • Asset-weighted ongoing charges in the predominantly institutional and high-net worth domiciles of Ireland and Switzerland are well below the European average; in Italy, Spain, France, and Belgium, fund expenses are on average higher relative to other domiciles. In Denmark, Germany, Italy, and Spain, asset-weighted ongoing charges have increased.
  • Funds available to investors in Sweden, Germany, the Netherlands, and Switzerland exhibit the highest degrees of economies of scale; conversely, investors in Belgium, Denmark, and Portugal enjoy no economies of scale benefits.
  • Investors in Denmark pay more in fees the larger their fund company, suggesting that Danish investors are better off choosing funds from fund companies with fewer assets.
  • Across the broad asset classes, the asset-weighted ongoing charge for equity, fixed-income, and allocation funds in Europe decreased overall.
  • On average, the European charge reduction for a commission-free equity share class is 46 basis points.
  • Overall, 10.3 per cent of equity fund assets studied are invested in passive funds, up from 8.0 per cent in 2013; in general, the study finds that increased penetration of passive funds is inversely related to the asset-weighted ongoing charge for such funds.

“There is clearly some good news for investors here that fund fees–in many cases–are coming down in Europe”, Nikolaj Holdt Mikkelsen, CFA, CIPM, Chief Analyst for Morningstar Denmark, said. “However, investors really do have to do their homework and take care to shop for a good deal. The new commission-free share classes have brought average fund costs down in some markets, but investors elsewhere are on average paying more now in asset-weighted expenses than just three years ago when Morningstar conducted a similar Europe-wide study. The 2016 study also shows that expensive funds have a tendency to remain expensive and cheaper funds will continue to be attractive in the future. This suggests that past ongoing charge levels are a strong predictor of future levels.”

For a copy of the “European Fund Expenses Are Decreasing in Percentage” research paper, please click here

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