NEW YORK ( TheStreet) -- With much fanfare, Charles Schwab ( SCHW) started selling a group of low-cost exchange traded funds. Some of the offerings come with the smallest expense ratios in the industry, and Schwab clients can trade the new funds for free. "No-commission trading has never been offered before, so Schwab is raising the heat on the competition," says Tom Lydon, editor of ETFTrends.com. In its effort to cut expenses, Schwab is hardly alone. Investment managers of all stripes have been reducing costs. Expense ratios have been falling for ETFs and open-end mutual funds. Even hedge funds have been cutting the fees they charge to institutions and wealthy individuals. Some of the fee cuts appear to be temporary measures aimed at helping companies attract customers during hard times. But the trend of lower expenses seems likely to continue even when the recession ends. As increasingly sophisticated investors comparison shop on the Internet, they are gravitating to the best bargains. The Schwab discounts are particularly notable because they undercut competitors that had long offered cheap expense ratios. With an expense ratio of 0.15%, Schwab International Equity ETF ( SCHF) underprices its largest competitor, iShares MSCI EAFE ( EFA), which has $35 billion in assets and charges 0.35%. Schwab U.S. Broad Market ( SCHB) charges 0.08%, competing against S&P 500 trackers, such as SPDRS ( SPY) and iShares S&P 500 ( IVV), which both charge 0.09% and hold a combined $90 billion in assets. The most notable element of the Schwab campaign is the free trading. Till now, investors buying ETFs have had to pay standard brokerage commissions for all trades. Retail investors with accounts of less than $1 million typically pay $12.95 for each trade at Schwab. The fees have made it prohibitively expensive for investors to put small amounts into ETFs. But that has changed. "If you are a Schwab client, it now makes sense to put $200 a month into an ETF," says John Gabriel, an ETF analyst for Morningstar.