Fund fees across the UK and mainland Europe have continued their decline, according to Morningstar’s European Fund Fee Study and accompanying Regulatory Landscape report.
Cost competition, investor preference for affordability and an changing regulations shaping the investment industry, according to the research.
“Even the costliest 10% of active funds, while still charging a significant premium, have joined the downward trend,” Morningstar found. Fee reductions have been steep in the passive segment, where investor flows have consistently favoured cheaper products.
“The UK leads with the lowest average active fund fees, supported by a competitive distribution landscape and regulatory action,” said Eugene Gorbatikov, analyst for passive strategies at Morningstar. However, fees remain higher across much of continental Europe, where captive distribution models and commission-based structures persist.
Italy emerged as the priciest market, according to the research.
Rise in institutional investment fund fees likely due to inflation
Vanguard was highlighted as offering the lowest passive fund fees, averaging 0.14%, while Swedbank topped the rankings on the active side with an average of 0.83%. Gorbatikov noted that “investors still allocate significantly to above-median fee funds,” but flows showed a tilt toward cheaper options.
Andy Pettit, director of policy research at Morningstar, said that research showed fees to be “among the most significant factors influencing investor returns.” He added that regulators are responding with enhanced disclosure requirements, pointing to upcoming UK Consumer Composite Investment rules and potential amendments to EU Key Information Documents.
Pettit cautioned that the drive for clearer cost reporting presents both continuity and comparability challenges for investors, as well as dual compliance burdens for firms. “These changes also create renewed focus for the industry to build greater trust with investors by prioritising transparency and clarity,” he said.
