The relationship between fees and fund outcomes has been well documented in academic and practitioner research. Lower‑cost funds, on average, have tended to exhibit higher survival rates and stronger long‑term performance than their higher‑cost peers. Our latest research finds that this relationship remains robust across major Asian markets.
Using data through December 2025, we analysed fund share classes available for sale in Hong Kong, Singapore, and Taiwan. To avoid survivorship bias, the analysis included funds that were merged or liquidated during the observation period. Funds were grouped into fee quintiles within their Morningstar Categories, allowing for like‑for‑like comparisons.
Measuring Fund Success
Fund outcomes were evaluated over the five years ended December 2025 using a success ratio framework. A fund was classified as successful only if it both survived and outperformed its category peers over the period. This approach provides a fuller assessment of investor experience than performance rankings alone, as it accounts for the higher probability of failure among weaker and more expensive funds.
Evidence Across Asset Classes
Across most asset classes, lower‑fee funds achieved meaningfully higher success ratios than higher‑fee alternatives. In addition, average returns generally declined as fund expenses increased.
Exhibit 1: Low Costs Are Key to Success
The fee effect was most pronounced in several core categories. For example, within global high‑yield bond funds, the lowest‑fee quintile recorded a success ratio of 61%, compared with just 8% for the highest‑fee quintile. Global and US large‑cap blend equity categories displayed a similar pattern, with lower‑cost funds demonstrating higher success ratios and stronger average performance.
For a comprehensive discussion of the analysis and results, please check out the full research paper: morningstar.com/en-hk/business/insights/research/asia-predictive-power-of-fees.
Enhancements to the Morningstar Medalist Rating methodology
As part of the enhancements to the Morningstar Medalist Rating methodology (https://assets.contentstack.io/v3/assets/blt9415ea4cc4157833/blt5820a2f56748ea50/Morningstar%20Medalist%20Rating%20Methodology.pdf) implemented in April 2026, we clarified how expenses are evaluated. We introduced the Medalist Rating Price Score (MPS) to indicate whether a fund’s fee represents a competitive advantage or a significant headwind.
