CFA Practice Question
Management fees for open-end mutual funds tend to be
A. about 0.5 to 1.5% of NAV. The management fees tend to be larger for large funds than for small funds because of the quickly increasing bureaucratic costs associated with larger funds. This has encouraged the existence of thousands of small mutual funds.
B. about 1 to 1.5% of NAV. The management fees tend to be larger for large funds than for small funds because of the quickly increasing bureaucratic costs associated with larger funds. This has encouraged the existence of thousands of small mutual funds.
C. about 0.25 to 1% of NAV. The management fees tend to be on a sliding percentage scale that decline with the size of the fund.
Explanation: Most management fees decline with the size of a fund. For example, a fund with assets of $500 million might charge management fees of 1%, a fund with assets of $1 billion might charge 0.75%, and a fund with assets of $6 billion might charge 0.25%.
User Contributed Comments 6
| User | Comment |
|---|---|
| JCopeland | The second part is mostly true. I'd like to know where these expense ratios come from? At least not from Mutual Funds which are the largest and most common type of open ended fund. The only type of Mutual Fund with expense ratios below 0.5% I've ever seen are index funds. 3 of the largest funds in the U.S. by NAV Pimco Total Return, Am Funds Growth Fd of America, and Fidelity Contrafund have expense ratios of 0.9%, 0.75%, and 1.01% respectively on the A shares. B & C are higher. There are numerous small funds that charge 1.5%. Is this in the book? |
| mc42086 | This is my real life experience as well. Only Index funds have rates below .5%. I would say 1% is average with most small cap or global funds above that mark. |
| Dc723 | I believe the question is referring only to Investment Management Fees. Management Expense Ratios are comprised of the Investment Management Fee, recordkeeping, custodial services, taxes, legal expenses, and accounting and auditing fees |
| Sheeb | .5 -1%, not in Canada. Our lowest mutual funds MERs are 1.5 - 3%! |
| bram | Sheeb consider you must remove the 1% embedded commission, but still, 1-1.5 i'd say. |
| Suharevat | omg, why... |