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Fund fees less expensive?
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February 23, 1999: 5:07 p.m. ET
A Morningstar study finds most fund companies have more work to do
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NEW YORK (CNNfn) - A handful of mutual-fund companies are doing a good job cutting annual fees to shareholders, but most have a lot of work to do, according to a new analysis by a Chicago mutual-fund researcher.
The study by Morningstar Inc. also challenged a fund industry trade group, the Investment Companies Institute, that said fees have fallen by a third between 1980 and 1997.
"You can't really say it (fee cuts) are happening across the industry," said Scott Cooley, an equity fund analyst at Morningstar. "People shouldn't be lulled into thinking expenses are necessarily falling at their fund family."
ICI, based in Washington, found in a November study that the average cost of investing in stock funds decreased from 2.25 percent in 1987 to 1.49 percent in 1997.
Cooley said in his survey that ICI made some mistakes in reaching those conclusions by making faulty comparisons. For example, the institute mixed together international funds and stock funds, which have different fees. ICI also reviewed load and no-load funds together.
Morningstar found that load funds actually have done a better job cutting costs, as investors have increasingly sought out no-load families like Vanguard and Fidelity. Load funds cut fees by 25 percent, Morningstar said.
Among load funds, American Funds cut fees from 2.59 percent a year in 1984 to 1.42 percent a year in 1998. Colonial Funds went from 2.98 percent to 2.65 percent and Eaton Vance went from 2.95 percent to 2.25 percent in the same time.
On the no-load side, costs decreased less than 10 percent over 14 years, Cooley found. But that's not so impressive if you consider that assets in no-load funds have soared in that time, he said.
American Century was at the top of Morningstar's list by cutting costs from 1.01 percent in 1984 to 0.96 in 1998. Fidelity's fees decreased from 0.80 percent to 0.68 percent in the same time.
"A lot of shareholders are more educated about expenses," Cooley said. "That's why they've been migrating to lower-cost funds…They understand higher expenses come out of their own pockets." 
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