Adding insult to injury, more mutual-fund firms will raise their fees, leaving shareholders to shoulder even more of the bear market burden than fund managers.
Even the Vanguard Group, long noted for its low fees, will soon charge customers more for buying into 31 of its funds, though analysts still expect the company to remain the low-cost leader.
The reason? Mutual-funds base their charges on a percentage of assets, the value of which has dropped even as some fund costs have remained fixed or even increased.
Vanguard’s decision to raise expense ratios is a clear sign to investors of a tough year ahead, especially as fee increases by other money managers will probably be higher.
"It's a testament to the market environment that even a fund family [like Vanguard] that's been taking in new money has seen its assets decline so much that it has to raise its expense ratios," Morningstar fund analyst Dan Culloton told The Wall Street Journal.
Investors purchased $84 billion in Vanguard shares across all its funds in 2008, and have bought $25 billion so far this year.
But the value of the shares in Vanguard funds has dropped from $1.3 trillion to just under $1 trillion, leaving the firm with an insufficient fee base.
If the stock market’s rise doesn’t continue, advisory fees paid to the managers will increase by $154 million, etfguide.com reports, especially as many advisors are looking to reduce or eliminate their fee waivers, which further raise costs to shareholders.
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