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Rekenthaler Report

Where Are the Economies of Scale?

Morningstar’s global study demonstrates that when funds become bigger, they don't necessarily become cheaper.

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Price Wars
Periodically, Morningstar publishes a study entitled Global Investor Experience, which evaluates the quality of the world's mutual fund marketplaces. The latest version of the report, published last month, measures fund costs. It shows that economies of scale aren't dependable. Fund companies consistently benefit from gaining new assets, but for investors, the advantages are hit or miss.

The GIE study estimates the ongoing cost paid by mutual fund investors in 26 countries, by calculating the median asset-weighted expense ratio for the funds that they own. The study does not include exchange-traded funds, which reduces its ability to assess the entire investor experience, but which improves its usefulness for this article. The cost comparison will be apples to apples, as the cliche goes.

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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.