As with many industries, size counts with mutual funds. It doesn't cost twice as much to manage a fund with $2 billion compared with a $1 billion fund.
Some of the fund's operational expenses remain fixed as the fund's total assets grow as a result of market appreciation and cash flowing into the fund from investors. The larger the fund's asset total, the more revenue that can be generated from fees.
Yet there are many mutual funds that continue to charge above-average fees despite their large asset totals. Research by S&P Capital IQ shows several large funds that continue to charge above-average fees, despite the cost-efficiency one might expect.
Fund analyst Todd Rosenbluth of S&P Capital IQ found 17 funds with more than $5 billion in assets that have expense ratios of 1.0 percent or more. These funds are charging above-average fees, yet rank among the largest 10 percent of funds based on size. Expense ratios for stock funds last year averaged 0.77 percent, according to the Investment Company Institute, an industry trade organization. The median average asset total for funds in 2011 was $350 million, with the largest 10 percent of funds having $4.19 billion or more, according to ICI.
Below are the largest five stock funds with expense ratios of 1 percent or higher for individual investors, according to S&P Capital IQ. Four of the five invest primarily in foreign stocks. On average, international stock funds charge higher expenses than U.S. stock funds:
|Fund||Morningstar stock fund category||Fund asset total, all share classes||Expense ratio, retail share class|
|Oppenheimer Developing Markets||(ODMAX)||Diversified emerging markets||$34 billion||1.36%|
|Thornburg International Value (TGVAX)||Foreign large-cap growth||$28.8 billion||1.29|
|Oakmark International (OAKIX)||Foreign large-cap blend||$14.7 billion||1.06|
|First Eagle Overseas (SGOVX)||Foreign large-cap blend||$13.1 billion||1.17|
|Hartford Capital Appreciation (ITHAX)||U.S. large-cap blend||$12.2 billion||1.16|
Source: S&P Capital IQ, Morningstar
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