Fund firms continued to cut fees in 2005, though at a slower rate than last year. Research from Lipper Inc. shows that some 700 funds reduced their fees so far this year. Though short of 2004, when 850 funds cut fees, that number is nearly three times the number of funds that cut fees as recently as 2003 when 239 did so, according to the fund tracker.

The Wall Street Journal reports that the overall fees on U.S. equity funds dipped 5 basis points, according to Lipper. The average equity fund charged 145 basis points in expenses at the end of June, compared to 150 basis points at the end of 2003.

Average expenses on international equity funds fell even more. The median charge on global stock funds 11 basis points to 174 basis points since the end of 2003. Over the same period, the median expense ration on sector funds fell 14 basis points to 174 basis points.

"The reason for the sharp rise in management-fee cuts is the examination by Eliot Spitzer in 2003," Kip Price, head of Lipper's global fiduciary review unit, told the paper. "A light was shone on fees, and then there were cuts."

Spitzer himself told the paper that he hopes the fee cutting will continue.

"Hopefully this will be a trend," Spitzer told the paper. "When we examined fees, we found that many mutual-fund boards weren't fulfilling their obligation to actively negotiate for lower fees on shareholders' behalf."

Though the Eliot Spitzer led settlements that required a number of firms to reduce expenses, those settlements do not account for all of the cuts, said Lipper. Instead, the reductions are driven by funds that are adding break points for investors. One of the most prominent firms to add break points was T. Rowe Price.

Meanwhile, other firms have seized on reducing fees as a way to increase sales. Fidelity investments, for example, has cut the fees on its family of index funds to make them the lowest cost in the industry. 

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