The ETF Fee Paradox — what the average dollar pays vs what the average fund charges
plvch · Research note
The ETF fee paradox.
US investors have never had cheaper access to the market: the average ETF dollar now pays 0.13% a year. The industry, meanwhile, has moved its launch effort almost entirely to active products, with the median new fund charging 0.69%. The money is starting to follow.
Published<br>June 2026
Category<br>Markets structure · fund economics
Data<br>62 quarters of raw SEC filings
Status<br>Open data · reproducible
§ 01
The shape of the market
The United States now has roughly as many ETFs as listed companies, and the two things most often written about them are both true: fund fees keep falling, and new funds keep getting more expensive. To be fair, a 0.60–0.70% median fee on recent launches is still progress relative to many older cohorts of active mutual funds. But sheer launch volume does not make the menu better, and it certainly does not make choosing from it easier for the typical investor. The contradiction sits in the word "average". This note rebuilds the full fee distribution from the primary source — every fee an ETF discloses in its prospectus and every census form it files with the SEC, from 2010 to 2026.
US '40 Act ETFs
3,954
SEC N-CEN census, trailing four quarters to 2026Q1.
Assets
$13.0T
Fiscal-year average net assets, as reported to the SEC.
What the average dollar pays
0.13%
Asset-weighted net expense ratio. The median fund charges 0.50%.
Industry fee revenue
$16.4B/yr
Implied: each fund's assets × its net fee, summed.
Sort the funds into five fee buckets — 3,820 of the 3,954 report both a fee and assets — and count three things for each: funds, assets, and the fee revenue those assets produce.
Figure 01
Funds, assets and fee revenue by expense-ratio bucket
Source · SEC N-CEN + Risk/Return XBRL
share of fund count<br>share of assets<br>share of fee revenue
0%
25%
50%
75%
8%
73%
25%
10%
10%
12%
0.10–0.20%
28%
12%
30%
0.20–0.50%
48%
5%
28%
0.50–1.00%
7%
0.4%
4%
≥ 1.00%
3,820 of 3,954 US '40 Act ETFs in the fiscal-2025 census (the rest lack a joined fee or assets). Net expense ratio per fund from prospectus Risk/Return XBRL filings; assets are fiscal-year average net assets from N-CEN. Revenue = assets × fee per fund, summed by bucket.
Funds charging under 0.10% are 8% of the shelf and hold 73% of the money . This is the cheap core built by Vanguard, BlackRock and State Street, where the price war happened. Funds above 0.50% are the reverse case: more than half the shelf, about a twentieth of the money. Revenue evens the picture out. The 0.50–1.00% bucket alone earns $4.6B a year , roughly as much as the entire $9.5T core.
Investors in aggregate pay very little, because the money concentrates in a few dozen cheap funds. The industry still makes three quarters of its fee income on the rest of the shelf.
§ 02
Fifteen years of fees
The price of the average fund never really fell. The price of the average dollar did.
"ETF fees keep falling" is true of the asset-weighted average, the fee paid by the typical dollar. The fee charged by the typical fund has sat near half a percent for fifteen years and has drifted up since 2020. The two lines below come from the same prospectus filings; only the weighting differs.
Figure 02
Median fund fee vs asset-weighted fee · 2011–2025
Source · SEC Risk/Return XBRL + N-CEN
median fund (what the typical ETF charges)<br>asset-weighted (what the typical dollar pays)
0.0%<br>0.2%<br>0.4%<br>0.6%
2011<br>2013<br>2015<br>2017<br>2019<br>2021<br>2023<br>2025
median fund · 0.50%<br>average dollar · 0.12%<br>fund-level assets reported from 2019
0.38 points apart
Net expense ratio per fund per year (net of waivers where a waiver exists, otherwise gross), from prospectus Risk/Return XBRL. Asset weighting uses fiscal-year average net assets from N-CEN, available at fund level from 2019 (2018 is omitted as partial). The fee-year-2025 panel value is 0.12%; the fiscal-2025 census snapshot used elsewhere in this note puts it at 0.13%. Pre-2019 fee history covers funds that survived to file an N-CEN census.
Trackers with longer asset records, Morningstar and ICI among them, show the asset-weighted line falling through the 2010s before settling near current levels. The median never joined that decline. Fees compressed where investors moved their money; the rest of the shelf never repriced. And the shelf kept growing: 3,954 funds in the fiscal-2025 census against about 2,000 in 2019, with 250–670 organic launches a year against roughly 100–200 closures.
§ 03
The launch conveyor
Most new funds are active, and priced accordingly.
The census marks each fund's first filing, which gives a reliable launch ledger from 2020. Launches nearly tripled between 2020 and 2025. Their composition changed more: the share that are actively managed (no index, a manager's discretion, often an options overlay) rose from 44% to 85%.
Figure 03
New ETF launches per...