Morgan Stanley predicts fund fees to fall up to 15%

Morgan Stanley has predicted that ETF and active fund fees will fall 10 to 15 per cent over the last three to five years.

Pressure on fees represents a Darwinian moment, according to the investment bank, Marketwatch reports.

“Mediocrity will no longer suffice for an industry under transformation,” Morgan Stanley says in a note to clients sent this week. “It’s winner take all.”

It notes among actively managed funds the “top three flowing firms took in 35 per cent of active equity industry flows” up from 32 per cent share in 2015 and 18 per cent share for the top three in 2010.”

“Intensifying secular changes could reshape the industry and compress fees by 10-15 per cent over the next three to five years, offsetting asset-driven growth and limiting earnings power,” Morgan Stanley says.