Mutual fund average expense ratios in 2014

Investor carrying a large version of the word Expenses on his back

Morningstar reports mutual fund expense ratios for nations having mutual fund industries that have at least 30 billion dollars of assets under management.

In 2014 that database consisted of 84,044 mutual funds managing 60.892 trillion dollars of assets. For 2014, the average expense ratio registered 1.44%, with the average management fee coming up to 1.01%.

We can measure this expense against the realized annualized global returns (1900 – 2014) for stocks, bonds and bills:

  • World equity annualized real returns: 5.2%
  • World bond annualized real returns: 1.9%
  • World treasury bill annualized real returns: 0.9%

With a 60/40 world equity/world bond portfolio having provided an annualized 3.98% return over the past 115 years we can see that a 1.44% implementation expense drag would consume 37% of  the annual realized real return to the investor, leaving a net  2.54% return.

The lowest average mutual fund expense ratios, roughly 1.00%,  are found in the United States, Switzerland, Mexico, and Norway. Many national  mutual fund industries  impose higher expenses on its investors.

These high mutual fund expense loadings are one likely factor in the increasing flow of global investors’ capital into index and exchange-traded funds.

Table: Mutual fund expense ratios across the globe

Country Expense Ratio Management Fee
United States 1.00% 0.66%
Luxembourg 1.61% 1.12%
United Kingdom 1.37% 1.06%
Brazil 2.41%
Ireland 1.38% 1.02%
Canada  – 1.70%
France 1.67% 1.15%
China 2.49% 1.03%
Japan  – 0.56%
Australia  – 1.35%
Germany 1.52% 1.03%
South Korea 1.18% 0.36%
Sweden 1.70% 1.19%
Switzerland 1.02% 0.80%
Italy 1.80% 1.29%
South Africa 1.66% 1.05%
India 1.80% 1.29%
Mexico 1.00% 0.58%
Denmark 1.19% 1.04%
Norway 0.98% 0.91%
Austria 1.46% 1.08%
Belgium 1.11% 0.95%
Finland 1.50% 1.23%
Thailand 1.35% 1.00%
Isreal  – 0.99%
Netherlands 1.77% 0.83%
Taiwan 1.61% 1.42%
Cayman Islands 1.72% 1.38%
Chile 2.68%  –
Malaysia 1.56% 1.34%
Hong Kong 1.39% 1.21%
Liechtenstein 2.25% 1.24%

Note

Table data is derived from this 2015 paper, with data attributed to Morningstar Direct/2014:

Smith, David M., The Economics of Mutual Funds: Rewards and Risks (May 25, 2015). Chapter 2 in “Mutual Funds and Exchange-Traded Funds:Building Blocks to Wealth,” Edited by H. Kent Baker, Greg Filbeck, and Halil Kiymaz, 2015. Available at SSRN: http://ssrn.com/abstract=2610428

The table ordering is based on assets under management.

I have emended one non-sensical data point: Denmark is reported to have a management fee of 1.42%, which is higher than the overall expense ratio. I have guessed that this is an error, and have emended the fee, assuming a misplaced decimal,  to 1.04%.

Morningstar does not report a management expense ratio for Brazil.

About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog

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