Mutual Funds and the New Total Expense Ratio
20 Pages Posted: 2 Jul 2009 Last revised: 6 Mar 2017
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Mutual Funds and the New Total Expense Ratio
Mutual Funds and the New Total Expense Ratio
Date Written: April 15, 2010
Abstract
This study presents the construct of a New Total Expense Ratio built upon the concept of normative transparency of disclosure that presents the reality of adviser/distributor payments to brokers "behind the mutual fund curtain." These payments paid indirectly by fund shareholders by way of fund fee payments. The New Total Expense Ratio includes: (1) management fees, (2) distribution fees, (3) "other" expenses, and (4) transaction costs. Sub-categories are also included.
Approval of the New Total Expense Ratio should foster significant prohibitions and changes in types of the huge payments made by mutual fund advisers from fund assets to brokers based on or derived from sales of adviser fund shares. However, the road to approval of the Ratio and prohibition or change in its revealed types of adviser/distributor payments (by way of fund fee payments) to brokers will require enormous widespread efforts against fund advisers who will fight to the bitter end to keep their most profitable status quo.
Keywords: new totoal expense ratio, management fees, distribution fees, other expenses, transactopm costs, 12b-1 fees, regulation, adviser, distributor, brokers
JEL Classification: G2, G23, G28
Suggested Citation: Suggested Citation
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