A market commentary argues that the index fund revolution was driven primarily by falling fees rather than indexing itself. The post highlights Vanguard 500 Index Fund’s fee decline from 43 basis points at its 1976 launch, saying investor interest remained limited until costs fell to 20 basis points and accelerated when fees reached 10 basis points.
The commentary also says expensive index funds have failed to attract meaningful assets, reinforcing the view that price has been the decisive factor in core fund competition. It adds that smart beta faced the same fee pressure about a decade ago and that active management is now entering a similar cost-driven shakeout.
Low Fees, Not Indexing Alone, Drove the Index Fund Boom, Commentary Says
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