Weekly Market Summary

Extra Credit^*

• Investors paid the lowest fund expenses on record in 2025, with the asset weighted average expense ratio for US mutual funds and ETFs falling to 0.32%, down 5.6% from 2024, according to Morningstar. The decline translated into an estimated $6.8 billion in savings for investors last year. Lower fees can have a meaningful long-term impact, as expenses compound over time and reduce overall investment returns.
• Fund fees continue to play a major role in directing investor flows. Since 2000, funds and share classes ranked among the cheapest 20% within their categories have consistently attracted the strongest inflows. In 2025 alone, these lower cost funds gathered approximately $694 billion in net inflows. By contrast, the remaining 80% of funds have experienced net outflows in 10 of the past 11 years, collectively losing $244 billion in 2025. The resulting $939 billion gap in flows underscores investors’ strong preference for lower fee products, though it remained below the record $1.2 trillion divergence seen in 2024.
• The shift in flows is not just about lower fees, but also about the dominance of low-cost passive investing. Over the past two decades, inexpensive passive funds have captured the majority of investor inflows. Since the beginning of 2021, the cheapest 20% of passive funds have attracted roughly $3.3 trillion, while active funds collectively experienced $1.5 trillion in outflows. Investor preference is increasingly concentrated in the very lowest cost products. In 2025, the cheapest 10% of funds gathered $545 billion in inflows, while the next cheapest decile attracted a far smaller $150 billion.

Morningstar as of 5/27/26.