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Investing in equity and hybrid mutual funds through 401(k) plansbecame less costly in 2018 while the average expense ratio of bondmutual funds remained stable, the Investment Company Institute, atrade group for the fund industry, reported last week.

Plan participants who invest in mutual funds in their 401(k)stend to hold lower-cost funds, the report showed.

“In this vibrant marketplace, funds compete to providecost-effective and diversified investment options for investors,”SarahHolden, ICI's senior director of retirement and investorresearch, said in a statement.

“Mutual funds represent the majority of assets held in 401(k)plans and the continuing decline in fees greatly benefits 401(k)plan participants building their retirement nest eggs. Both plansponsors and investors pay close attention to fees and fuel thecompetitive pressure to bring them down.”

At the end of last year, mutual funds represented 63% of the$5.2 trillion in 401(k) plan assets. Plan participants incurred anaverage expense ratio of 0.41% for equity mutual funds in 2018,compared with 0.45% in 2017 and 0.77% in 2000 — a 47% decline.

The average expense ratio that 401(k) plan participants incurredfor investing in hybrid mutual funds fell to 0.49% in 2018, downfrom 0.51% in 2017 and 0.72% in 2000. Bond mutual fund investorssaw their average expense ratio hold steady at 0.34% between 2017and 2018, down from 0.6% in 2000.

ICI noted in the statement that it uses asset-weighted averagesto measure the expense ratios investors actually incur forinvesting in mutual funds.

The simple average expense ratio, which measures the averageexpense ratio of all funds offered for sale, can overstate whatinvestors actually paid because it fails to reflect the fact thatinvestors tend to concentrate their holdings in lower-costfunds.

According to the report, 401(k) plan participants'asset-weighted average expense ratio for equity mutual funds lastyear was less than the industrywide asset-weightedaverage expense ratio: 0.41% vs. 0.55%. Not only that, it wasabout one-third of the industrywide simple average of 1.26% for allequity mutual funds offered in the U.S. in 2018.