The Markets April 2, 2025

Popularity of No-Load Mutual Funds Whittles Down Fees

Expense ratios for mutual funds and ETFs have plunged over the past 28 years, per an ICI report.

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Thanks to the popularity of no-load funds, the average expense ratio for mutual funds has been steadily declining over the past three decades, per a report from the Investment Company Institute.

According to ICI’s “Trends in the Expenses and Fees of Funds,” between 1996 and 2024, the average expense ratio for equity and bond mutual funds dropped 62% and 55%, respectively. During that time, U.S. gross sales of long-term mutual funds without 12b-1 fees doubled to 92% in 2024 from 46% in 2000. Additionally, between 2011 and 2025, the share of assets in index mutual funds and exchange-traded funds surged to 51% of all long-term mutual fund net assets, up from 19%.

“Retail investors in the U.S. save considerable money over the course of their investing lives thanks to a vibrant and competitive fund market,” said Shane Worner, the ICI’s senior director of industry and financial analysis, in a statement.

During 2024, the average expense ratio for equity mutual funds declined three basis points to 0.40%, while bond mutual funds’ average expense ratio edged one basis point higher to 0.38%. The average expense ratio for index equity ETFs fell two basis points to 0.14%, and the average expense ratio for index bond ETFs was down one basis point to 0.10%.

According to ICI research, the expense ratios for mutual funds often depend on what kind of fund it is. Money market mutual funds and bond funds tend to have lower expense ratios than equity and hybrid mutual funds, for example. Within equity mutual funds, global funds and sector funds—such as tech, energy and health care—tend to have higher expense ratios because they typically cost more to manage.

Fund size and asset growth also factor into expense fees. For example, fund costs such as transfer agency fees, accounting fees, audit fees and director fees are essentially fixed in dollar terms, according to the report. “As a result, when fund assets rise, these relatively fixed costs make up a smaller proportion of a fund’s expense ratio,” the report stated.  

Expense ratios can also can vary widely within a fund’s objective. For instance, ICI research found that 10% of equity mutual funds focusing on growth stocks have expense ratios of 0.59% or less, while another 10% have expense ratios at least three times that at 1.77% or greater.

As of the end of 2024, sector equity mutual funds had the highest average asset-weighted expense ratio at 0.68%, with high-yield bond mutual funds next at 0.60%. They were followed by hybrid mutual funds and growth equity mutual funds at 0.58% each. Meanwhile, index equity mutual funds had the lowest average asset-weighted expense ratio at 0.05%, followed by money market mutual funds and blended equity mutual funds at 0.22% and 0.23%, respectively.

The Markets April 1, 2025

Larry Fink Touts Importance of Private Assets in Annual Letter

One way to fix the “retirement gap” is to increase access to alternative investments in 401(k) plans, according to BlackRock's Fink, writing in his annual letter.

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Larry Fink, chairman and CEO of $11.5 trillion asset manager BlackRock Inc., wants to expand investor access to alternative investments and warned that too few Americans are saving for retirement in his annual chairman’s letter.

Fink writes that the assets that will “define the future”—including data centers, ports, power grids and the fastest-growing private companies—are out of reach for most investors, only accessible by institutions and high-net-worth individuals.

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“The reason for the exclusivity has always been risk. Illiquidity. Complexity. That’s why only certain investors are allowed in,” Fink wrote. “But nothing in finance is immutable. Private markets don’t have to be as risky. Or opaque. Or out of reach. Not if the investment industry is willing to innovate.”

Fink highlighted BlackRock’s recent acquisitions of private credit firm HPS Investment Partners, infrastructure manager Global Infrastructure Partners and alternatives data firm Preqin, pushing the firm beyond being a traditional asset manager.

“BlackRock has always had a foot in private markets. But we’ve been—first and foremost—a traditional asset manager,” Fink wrote. “That’s who we were at the start of 2024. But it’s not who we are anymore.”

Investing for Retirement 

According to a January BlackRock survey, 33% of Americans have no retirement savings, 51% are more worried about outliving their savings than about dying, and one-third of Americans would have a hard time paying an unexpected $500 bill.

One way to fix the “retirement gap” is to increase access to alternative investments in 401(k) plans, according to Fink.

“We’re going to need better ways to boost portfolios,” Fink wrote. “As I wrote earlier, private assets like real estate and infrastructure can lift returns and protect investors during market downturns. Pension funds have invested in these assets for decades, but 401(k)s haven’t. It’s one reason why pensions typically outperform 401(k)s by about 0.5% each year.”

According to BlackRock, that additional 0.5% every year, when compounded over 40 years, will result in 14.5% more money in a 401(k) plan by the time of retirement. “Or, put another way, private assets just bought you nine extra years hanging out with your grandkids,” Fink wrote. 

Still, there is a long way to go before alternative investments become ubiquitous in employer-sponsored defined contributions plans. While the number of plan sponsors implementing alternative strategies in their plans has increased, sponsors are often faced with lawsuits by plan participants alleging that such investments are violating the plans’ fiduciary duties under the Employee Retirement Income Security Act.

The illiquidity of these assets is another issue.

“When you invest in private assets—like a bridge, for example—the values of those assets aren’t updated daily, and you can’t withdraw your money whenever you want,” Fink wrote. “It’s a bridge, after all—not a stock.”

But Fink is confident that alts will play a role in the retirement accounts of the future.

“Asset managers, private-market specialists, consultants, and advisers all play a role in guiding 401(k) providers. That’s part of the reason I’m writing this letter—to cut through the fog,” Fink wrote. “We need to make it clear: Private assets are legal in retirement accounts. They’re beneficial. And they’re becoming increasingly transparent.”

Another important financial wellness tool for American, Fink wrote, is expanding emergency savings.

“No one invests for retirement if they’re worried about paying for a flat tire or ER visit tomorrow,” Fink wrote. He called the emergency savings provision of the SECURE 2.0 Act of 2022 “just a start” and suggested, “We can simplify the rules further, raise contribution limits, and enable automatic enrollment in standalone emergency accounts.”

The 50/30/20 Portfolio and Infrastructure 

Fink’s letter suggested the standard portfolio of the future will include allocations to stocks, bonds and private assets, the latter acting as a diversifier, with infrastructure playing an important role. He described a new standard allocation of 50% stocks, 30% bonds and 20% alternatives. The traditional 60/40 stock/bond portfolio may well be a thing of the past.

“Generations of investors have done well following this approach, owning a mix of the entire market rather than individual securities,” Fink wrote. “But as the global financial system continues to evolve, the classic 60/40 portfolio may no longer fully represent true diversification.”

Fink noted three benefits of including infrastructure in a portfolio; inflation protection, volatility protection and strong historical returns. According to BlackRock, adding infrastructure to both a 60/40 portfolio and a pension portfolio increases returns and decreases portfolio volatility.

Also according to BlackRock, $68 trillion in infrastructure investment will be needed between 2024 and 2040, which Fink described as the equivalent of building the U.S. interstate highway system and its transcontinental railroad every six weeks for 15 years.

But for infrastructure investments to make sense for individuals and for retirement accounts, Fink called for the deregulation of infrastructure permitting.

“We can’t democratize investing if it takes 13 years to build a power line,” Fink wrote, noting that it typically takes longer to permit infrastructure projects than it takes to build them. “Giving retirement investors access to infrastructure matters less if the infrastructure never gets built. That’s often the case today.”

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