Mutual Funds and the New Total Expense Ratio

20 Pages Posted: 2 Jul 2009 Last revised: 6 Mar 2017

See all articles by John A. Haslem

John A. Haslem

University of Maryland - Robert H. Smith School of Business; University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

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

Haslem, John A. and Haslem, John A., Mutual Funds and the New Total Expense Ratio (April 15, 2010). Available at SSRN: https://ssrn.com/abstract=1428593 or http://dx.doi.org/10.2139/ssrn.1428593

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