There are significant variations in the costs of funds across Europe and America, recent research from Lipper shows.
Its latest report, a transatlantic study of mutual fund expenses, reveals the average total expense ratio (TER) across all actively managed funds is highest for European cross-border funds, at 1.98%. British-domiciled funds average 1.66%, German funds 1.57% and American funds 1.32%.
However, when these averages are weighted by funds’ assets, to better reflect where the bulk of investor money is held, TERs fall to 1.89% for cross-border funds, 1.63% for British, 1.44% for German, and 0.91% for American funds.
Lipper says the report shows the impact of the distribution channel on fund expenses, because fees paid to distributors are a key influence on TERs, especially for European funds.
Cross-border equity funds typically bear distribution fees of around 70 basis points, while the equivalent share class in America charges 25 to 35 basis points, Lipper says.
Ed Moisson, the head of consulting at Lipper FMI, urges fund groups to balance the pressures of generating sales with the need to be sensitive to investors’ cost-consciousness. Fees and expense levels must be justified to those overseeing a fund’s activities, he adds.