The US mutual fund market charges lower fees to investors than its European counterpart and the former market contains fewer but larger funds, enabling economies of scale and greater effiency, according to new data issued by fund-tracker Lipper.

When the average total expense ratio – the total cost of running a fund – is weighted by fund assets - the TER on a US fund is only 0.91 per cent, contrasting with 1.44 per cent on a German fund, 1.63 per cent on a UK fund and 1.89 per cent on cross-border European funds, the report said.

Industry figures have argued for years that the US market, which is more integrated and less fractured by separate tax, regulatory and business differences, makes it possible for an industry to operate with fewer, but much bigger funds, than is the case in Europe. As a result, US fund pricing is more competitive and efficient.

In Europe, there are 1,700 fund groups overseeing a total of $6.5 trillion of assets, but the larger US market, with $10.1 trillion of assets, there are far fewer fund groups – just 600.

Relatively new fund wrappers such as UCITS, which are designed to be bought and sold across European Union borders, are seen as a way of fostering a more efficient, less nationally fractured fund market, but the Lipper data suggests the market is still relatively undeveloped.

Among other details, Lipper said fees paid to distributors are highlighted as a key influence on a fund’s TER, particularly for cross-border funds in Europe.  Cross-border equity funds typically bear distribution fees of around 70 basis points, while the equivalent share class in the US charges 25 to 35 basis points.

Commenting on the analysis, Ed Moisson, Head of Consulting at Lipper FMI, said: “Fund companies must balance the competing pressures of setting appropriate incentives to generate sales, while being sensitive to investors’ cost-consciousness, and justifying fee and expense levels to those overseeing a fund’s activities.”