and is dependent on the total assets of the fund. This includes customer support, client communication, etc. Administrative Charges: These are the costs incurred for managing the fund.5% – 1% is deducted as a management fee of the total asset under management.
The management fee is basically compensation for these managers for their expertise. Fund managers are professionals and possess decades of experience in the same field. Management Fee: Investments made by the fund are dependent on the decisions taken by the fund managers.The expense ratio has an impact on your take-home return. This is informed to the investors on a six-monthly basis. The cost incurred by the fund house is recovered from the investor on a day-to-day basis. Alternatively, the expense ratio will be lower in case the fund has a higher asset under management. The expense ratio will be higher in a case where the asset under management of a fund is lower. These guys track the markets and the companies in the fund’s portfolio. manages the fund in order to generate better returns for the investors. A group of people, being fund managers, analysts, etc. In order to manage a fund, in-depth knowledge of the market is required. Say, an expense ratio of 2% per annum means that each year 2% of the fund’s total assets will be used to cover the operating expenses of the funds.Īs per SEBI regulations, mutual funds are permitted to charge certain operating expenses for managing a fund. Simply put, it is a ratio of the fund’s total expenses and it’s an asset under management. The expense ratio or annual fund operating expenses is a ratio that measures the per-unit cost of managing a fund. Impact of Expense Ratio on Fund Returns?.
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