Morningstar has released its European Fund Fee Study, alongside a Regulatory Landscape, spotlighting the changes shaping the investment industry and the challenges investors face in navigating costs.
Key Findings on Fund Fees:
“Over the past decade, fund fees in the UK and mainland Europe have steadily declined, driven by fee competition in the passive space, the rise of lower-cost funds and the phasing out of pricier options. Even the costliest 10% of active funds, while still charging a significant premium, have joined the downward trend.
“Although investors still allocate significantly to above-median fee funds, net flows have favoured cheaper options. This shift highlights investors’ growing preference for affordability and the competitive pressures reshaping the industry.
“The UK leads with the lowest average active fund fees, supported by a competitive distribution landscape and regulatory action. In contrast, fees remain higher on the continent due to captive distribution and commissions, with Italy being the most expensive market.
“Among the largest providers, Vanguard stands out as the cheapest, with passive fund fees averaging 0.14%, alongside Swedbank for active fund fees averaging 0.83%,” commented Eugene Gorbatikov, Analyst for Passive Strategies at Morningstar
How is the Regulatory Landscape Shaping Fees?
“Research consistently shows that fees are among the most significant factors influencing investor returns, and regulators recognise this. Cost disclosure rules have evolved over time and continue to be in the spotlight. Further transition is imminent with upcoming UK Consumer Composite Investment rules, while amendments to EU Key Information Documents remain a possibility.
“This quest to ensure providers present cost data clearly and meaningfully introduces continuity and comparison challenges for investors and dual requirements for firms to meet. These changes also create renewed focus for the industry to build greater trust with investors by prioritising transparency and clarity,” commented Andy Pettit, Director, Policy Research at Morningstar.
