European investors have saved over £77.4 (€90.6) billion in investment costs since 2011 by opting for index funds, including ETFs, according to a new survey by asset manager Vanguard’s Investment Strategy Group.
According to the researchers, this saving highlights the cost efficiency of index funds compared to actively managed funds. The analysis compared the assets in indexing with the expense ratios of active and index funds for European domiciled investments. Findings showed that, despite a decrease in expense ratios over the past 12 years, the difference remains substantial: 1.05% for active funds versus 0.21% for index funds as of the end of 2023.
Stephen Lawrence, head of indexing research at Vanguard, said: “Index funds have vastly improved outcomes for investors through low fees, which correlate with better-than-average fund performance. They also introduce competitive price pressure, benefiting all investors.”
Lawrence added that while skilled active managers exist, their benefits are often offset by higher costs. According to the researchers, low-cost funds, both active and index, will continue to play a crucial role in investor portfolios, while high-cost funds will become less relevant.
