ETF Fees Rising as Active Management Grows

At least 400 ETFs have raised their fees this year, Morningstar survey finds.

Wealth Management Editor
Reviewed by: Staff
Edited by: Mark Nacinovich

As the ETF market cruises past various milestones representing expanding growth and market share, the year-end inevitably attracts reflections and forecasts. Among those is a curious focus on the direction of fees. 

For an investment wrapper that proudly boasts a reputation for being able to compete on price, it is no big surprise that Morningstar expects ETF fees to keep dropping even as actively managed strategies gain popularity. 

As Morningstar analyst Zackary Evans detailed in his recent report, the asset-weighted average fee for all U.S. ETFs is just 0.15%, with only about one in 10 exchange-traded funds charging fees below that. 

“Investors have made their preferences clear, parking 61% of total ETF assets in low-cost, usually index-tracking funds that keep the asset-weighted average fee low,” Evans wrote. 

However, with higher priced actively managed and alternative strategy ETFs now growing faster than traditional passive strategies, there is suddenly upward pressure on overall ETF fees, which is a new twist for the funds. 

Fees Jump, as Active ETF Assets Grow 

According to Evans, more than a third of ETFs don’t track an index. “While these funds only account for 6.4% of ETF assets right now, that figure is increasing steadily,” Evans explained.  

This quiet and counterintuitive trend is also something being watched by Elisabeth Kashner, director of exchange-traded fund research and analytics at FactSet

In compiling her 2023 ETF data, Kashner noted that “we’re seeing, for the first time, significant numbers of fee hikes, and fee compression is slowing.” 

“I counted over 400 fee hikes in 2023, and that’s extraordinary,” she said. “Some of it has to do with where firms feel they have market power, and others, I think, may be more of a last grasp effort to make an ETF profitable.” 

Kashner cited, for example, the wild popularity of the $30.6 billion JPMorgan Equity Premium Income ETF (JEPI), which has seen $13 billion in net flows this year while charging an above-average 35 basis points. 

“Maybe investors see it as a steal compared to 75 basis points in a mutual fund, but 35 basis points is kind of outrageous these days,” she said. 

Contact Jeff Benjamin at [email protected] and find him on X at @BenjiWriter      

Jeff Benjamin is the wealth management editor at, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.