As if 2008 wasn’t bad enough, now comes word from Investment News that mutual fund expense ratios might actually be going UP next year.
According to the article, as mutual fund assets have gone down due to both market declines and redemptions, there are fewer revenues to help cover fixed costs, such as accounting and legal fees, call centers, insurance premiums, real estate costs, as well as fewer shareholders left to shoulder those expenses.
I’m not sure the mutual fund companies won’t go ahead and accept lower profitability. The growth of ETFs and their lower cost structure will continue to put pressure on the industry to reduce expenses. As the article quotes one investment advisor, “If a fund (expense ratio) goes up to 1.9% from 1.4%, after they lost more than that in the market, I’ll look at ETFs.”