Investors paid lower fees for U.S. open-end mutual funds and exchange-traded funds (ETFs) in 2016 than ever before, according the latest analysis by independent investment research company Morningstar. The firm found that the asset-weighted average expense ratio across these funds, excluding money market funds and funds of funds, was 0.57% in 2016—marking a decrease from 0.61% in 2015 and 0.65% from three years ago.

Morningstar attributes this decline to investors’ growing demand for lower-cost funds, particularly passive funds and institutional share classes with lower fees. The firm also points to a growing shift in passive funds and a drawback from actively-managed funds. Morningstar reports that these low-cost mutual funds generally outperform their more expensive peers, and are seeing a sharp increase of inflows.

The research team notes that annual flows into passive funds have doubled from about $200 billion in 2007 to more than $400 billion in 2016. Beginning in 2011, flows into passive funds outpaced flows into active funds every calendar year, despite the fact that active funds outnumber passive funds by eight to one. Morningstar also points out that “passive funds have also continued to be significantly cheaper than active funds costing investors an average 0.17% in 2016, 58 basis points less than active funds.”

However, the firm reports that the biggest flight from active funds has been seen in the most expensive ones; meanwhile, low-cost active funds saw “positive, albeit small inflows.” The most expensive active funds saw $369 billion in outflows between 2014 and 2016. The least expensive passive funds continue enjoying the biggest inflows each year.

In 2016, the asset-weighted average expense ratio for passive funds was 0.17%, compared with 0.75% for active funds. 

Among the largest fund managers, Vanguard has the lowest asset-weighted average expense ratio of 0.11%. Morningstar notes “Vanguard’s low-cost passive funds had a notable impact on the industry’s declining asset-weighted average expenses. From 2013 to 2016, the industry-wide asset-weighted average expense ratio fell from 0.65 percent to 0.57 percent. Excluding Vanguard, the expense ratio decline would have been less, from 0.69 percent to 0.62 percent.”

Following Vanguard are SPDR State Street Global Advisors with an asset-weighted average expense ratio of 0.19% and Dimensional Fund Advisors at 0.36%.

Morningstar says that “In this study, we used the asset-weighted average expense ratio instead of a simple average, or equal-weighted average, expense ratio. We feel an asset-weighted average is a better measure of the average cost borne by investors than a simple average, which can be skewed by a few outliers, such as high-cost funds that have low asset levels. In 2016, the simple average expense ratio for all funds was 1.14%, but funds with an expense ratio above that level held less than 10% of fund assets at the end of 2016.”

The full report ca be found at Morningstar.com.