#Total expense ratio professional

#Total expense ratio professional

It is widely accepted that the TER consists of primary investment management expenses including back-office costs such as administration, custody, depositary and trustee costs, professional fees such as audit and legal costs, and charges paid by funds that are sold cross-border in Europe such as printing, publishing and marketing expenses. What are TERs? What are the hidden expenses beyond TERs? And how can investors measure the true costs of their funds?Įd Moisson, head of UK and cross-border research at Lipper, a subsidiary of Thomson Reuters, defines the total expense ratio as “the drag on fund performance caused by all annual operating costs assuming a portfolio is held and not traded”. But this excludes the 2,000 bp of performance fees where applicable, 50 bp of risk monitoring fees, 15 bp of index fees and 6 bp of custody fees,” says Peter Sleep, senior portfolio manager at Seven Investment Management. “A hedge fund ETF that I know charges a total expense ratio of 90 basis points. But closer inspection of the realised fund returns and their accounting reports quickly provides something of a reality check. They imply, either intentionally or unintentionally, that investors will not incur any costs in addition to them. The terms “total expense ratio” and “all-in fee” are often used in prospectuses, “simplified” prospectuses and marketing documents of funds and ETFs to refer to cost figures.