Two patterns concerning total expense ratios emerged from an annual analysis of mutual fund expenses at Lipper. These patterns are consistent across classifications/objectives and fund type.
The first shows that asset-weighted average total expense ratios tend to be lower than average total expense ratios. The latter is a ratio that is a simple average for a set of funds; the former essentially counts the bigger funds with more weight. (As one example, large-cap institutional funds have an average total expense ratio of 1.004%, compared to an asset-weighted average ratio of 0.744%.). The difference between these two ratios stems from economies of scale. As a fund grows in size, like a corporation, it may achieve operational efficiencies.
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