The Investment Company Institute, the mutual fund industry's trade association, published a study on fund expenses Tuesday entitled, "Trends in the Fees and Expenses of Mutual Funds, 2009." The study says, "The average fees and expenses of money market funds fell 4 basis points in 2009. The average expense ratio on money market funds fell to 34 basis points in 2009 from 38 basis points in 2008."
On page 8 of the study, ICI discusses "Money Market Funds, saying, "From 1990 to 2009, the fees and expenses of money market funds declined 21 basis points, a reduction of 38 percent. The average expense ratio of money market funds declined last year both as a result of a decline in expense ratios among individual funds, as well as an increase in the market share of institutional money market funds. In 2009, the average expense ratio of retail money market funds declined 3 basis points, while that of institutional money market funds fell 1 basis point."
It explains, "[I]nstitutional money market funds continued to gain market share in 2009, and by year-end 2009, they held more than two-thirds of the assets of all money market funds. Because institutional money market funds tend to have lower expense ratios than retail money market funds (reflecting the fact that retail funds serve more investors with smaller average account balances), the increase in the market share of institutional money market funds helped to lower the industrywide average expense ratio of all money market funds."
Charts in the study show asset-weighted expense ratios for retail money funds declining from 60 basis points in 1999 to 50 bps in 2009, while institutional money fund expenses declined from 32 bps to 27 bps over the 10-year period. They also show institutional assets rising as a percentage of total money fund assets from 40% in 1999 to 56% in 2004 to 68 percent in 2009. Money fund expenses overall have fallen from 55 bps in 1990 to 34 bps in 2009.
Crane Data's most recent averages in our Money Fund Intelligence XLS show expense ratios of 0.30% for our all taxable Crane Money Fund Average and 0.27% for our Crane 100 Money Fund Index as of March 31, 2010. A year ago, these averages were 0.48% and 0.37%, respectively. As we've noted, obtaining accurate expense information has become a challenge in the current ultra-low interest rate environment as fee waivers cause ratios to vary almost daily.
