The Investment Company Institute, the trade group for the mutual fund industry, published a press release entitled, "US Equity Fund Fees Continue to Decline Amid Rising Investor Demand for Lower-Cost Options," along with the report, "Trends in the Expenses and Fees of Funds, 2024." The full report tells us, "On an asset-weighted basis, average expense ratios incurred by mutual fund investors have fallen substantially over the past 28 years.... In 1996, equity mutual fund investors incurred expense ratios of 1.04 percent, on average, or $1.04 for every $100 in assets. By 2024, that average had fallen to 0.40 percent. Average expense ratios of hybrid and bond mutual funds, as well as money market funds, have also declined meaningfully since 1996." (Note: Welcome to those attending our Bond Fund Symposium Thursday and Friday in Newport Beach! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2025 Download Center.")
A table, "Average Expense Ratios Incurred by Mutual Fund Investors Have Declined Substantially Since 1996," presents expense ratios by type from 1996 to 2024 and shows bonds fund averages falling from 0.84% to 0.38% over this period and money fund ratios falling from 0.52% to 0.22%. (Note: Crane Data shows the average expense ratio for money market mutual funds at 0.27% as of 2/28/25 as measured by our Crane 100 Money Fund Index.)
It explains, "Like the prices of most goods and services, the expense ratios of individual mutual funds differ considerably across the array of available products. For example, fund size and asset growth play an important role in mutual fund expense ratios. Some fund costs -- such as transfer agency fees, accounting and audit fees, and director fees -- are relatively fixed in dollar terms, regardless of fund size. As a result, when fund assets rise, these relatively fixed costs make up a smaller proportion of a fund's expense ratio."
ICI writes, "Fund expense ratios can also vary by fund type.... For example, bond and money market mutual funds tend to have lower expense ratios than equity and hybrid mutual funds." Another table, "Mutual Fund Expense Ratios Vary Across Investment Objectives," shows bond fund expenses averaging 0.32% at the 10th percentile, 0.70% at the Median, 1.55% at the 90th percentile, 0.38% for the asset-weighted average and 0.82% for the simple average. For money market funds, it shows averages of 0.11% at the 10th percentile, 0.30% at the Median, 0.73% at the 90th percentile, 0.22% for the asset-weighted average and 0.38% for the simple average."
The section on "Money Market Funds," comments, "The average expense ratio for money market funds remained unchanged at 0.22 percent in 2024.... Over the past 16 years, movements in the average money market fund expense ratio have largely been driven by changes in funds’ use of expense waivers."
It continues, "The Federal Reserve reduced short-term interest rates to nearly zero during the 2007–2009 financial crisis and kept them there until the end of 2015. Because gross yields on taxable money market funds (the yield before deducting the fund's expense ratio) closely track short-term interest rates, most money market funds had gross yields that were close to zero. To prevent their net yields (the gross yield minus fund expenses) from falling below zero, most money market funds adopted expense waivers during this period."
ICI writes, "With an expense waiver, a fund's adviser agrees to absorb all or a portion of a fund's fees and expenses. Expense waivers reduce funds' expense ratios and boost their net yields but are costly for fund advisers. Between 2009 and 2015, fund advisers waived $36 billion in money market fund expenses."
The report states, "From March 2022 to mid-2023, the Federal Reserve aggressively raised the federal funds rate from near zero to more than 5 percent to combat high inflation and then maintained it at an elevated level throughout 2024. With short-term interest rates well above zero, money market funds have been able to pare back their use of expense waivers—total money market fund waivers decreased from $8.4 billion in 2021 to just $1.5 billion in 2024.... The percentage of money market funds offering waivers declined from 97 percent at year-end 2021 to 64 percent by year-end 2024. Consequently, the average expense ratio for money market funds increased from 0.11 percent in 2021 to 0.22 percent in 2024."
