12/18/2023 0 Comments Total expense ratioBut not all types of transaction costs are required to be reported in the expense ratio, which means it isn’t an especially helpful tool for making transaction cost comparisons. Is it useful to know how much a fund is paying for investment-related costs? Of course. Unlike the various operating costs a fund company deducts from fund returns-such as accounting, legal, and administrative fees distribution costs and the compensation the firm collects for managing the portfolio-the interest and dividend costs a fund incurs are a consequence of the investment decisions made by the portfolio manager, not unlike trading costs. Removing interest and dividend expense from the expense ratio gives investors a better sense for what a fund company is charging them for the cost of running the fund. ![]() The adjusted expense ratio further strips out interest and dividend expenses from the net figure, a step that helps provide the end investor with an apples-to-apples comparison of expense ratios across funds. The net expense ratio takes that figure and removes any contractual fee waivers and reimbursements. To calculate the adjusted expense ratio, we start with the gross expense ratio reported in a fund’s prospectus, which is the percentage of fund assets expected to be paid over a year for operating expenses, management fees, and interest and dividend expenses. Here’s why the adjusted expense ratio is important. ![]() That figure used to be incorporated in our methodology for calculating the prospectus net expense ratio, but we launched it as a separate data point in 2019. As we’ve noted before, our analysts have long used a modified version of the prospectus net expense ratio to make cost comparisons when researching and rating funds. Treasury yields plumbing new lows, you may have come across a new data point on : the adjusted expense ratio. If you haven’t been distracted by pandemic fears, falling stock prices, and U.S.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |