Morningstar Magazine - August/September 2017 - 49

EXHIBIT 5

Market Share Load shares suffer rapid decline.
Other/No Load

Load

Institutional

ETFs

Retirement

Market Share by Fund Share Class Type

100
%
75
50
25
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: Morningstar. Data as of 12/31/2016.

BlackRock also saw a significant 21% decline in
its asset-weighted average expense ratio during
the past three years, largely because of the
$297 billion in net inflows to its iShares ETFs.
In 2012, the firm launched its iShares Core ETFs,
which are priced to compete with Vanguard's
lowest-priced index funds, and large flows
into these Core products also contributed to the
firm's falling asset-weighted fees. As a result,
BlackRock/iShares' growth (albeit small) in market
share to 8% in 2016 from 7% in 2013 was
second after Vanguard.

largest funds has remained at 0.72% over the past
three years.

Some major fund providers have trimmed fees
on their largest funds, some because of
asset growth, but some perhaps to be more
competitive. American Funds trimmed
fees on the A shares of some of its largest funds
during the past three years, even as these
funds saw net outflows. Fidelity's overall
declines were the result of price cuts to its large
index funds. JPMorgan trimmed fees on a
few of its "core" type funds. However, there
were funds that exhibited rising fees,
so industrywide, the simple average for the

Taking the Low-Fee Road
Investors' preference for low-cost investing has
grown starker during the past few years. The
exodus out of active funds has been limited to the
most expensive active funds; low-cost active
funds enjoyed positive, albeit small inflows. The
shedding of these expensive active funds,
which began in 2014 with outflows of $91 billion,
reached $369 billion in 2016. Passive funds
continue to enjoy larger flows every year, but only
into funds with low fees relative to other
passive funds.

EXHIBIT 6

Family Flows Vanguard cuts fees and grows market share.

2013

2016

Change (%)

2013

2016

Estimated
3-Year Net
Flow $Bil

Vanguard

0.14

0.11

-21

18

22

739

American Funds

0.74

0.68

-8

9

8

3

Fidelity Investments

0.62

0.58

-6

9

8

-60

BlackRock/iShares

0.48

0.38

-21

7

8

262

SDPR State Street

0.18

0.19

6

3

3

32

T. Rowe Price

0.73

0.71

-3

3

3

7

Franklin Templeton

0.87

0.87

0

4

3

-73

Dimensional Fund Advisors

0.38

0.36

-5

2

2

70

PIMCO

0.68

0.67

-1

5

2

-250

JPMorgan

0.79

0.73

-8

2

2

21

Asset-Weighted Average Fees (%)

Market Share (%)

Thanks to these trends, investors paid an assetweighted average of 0.57% for their fund
holdings in 2016. This cost decline of 7% from
the year prior was the largest ever, based on data
going back to 1990. Falling fund costs are certainly
a positive trend for investors, as mutual fund
costs have a dollar-for-dollar impact on the returns
investors ultimately realize. K
Patricia Oey is a senior manager research analyst with
Morningstar Research Services.

Source: Morningstar. Data as of 12/31/2016.

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Table of Contents for the Digital Edition of Morningstar Magazine - August/September 2017
