Mutual Funds and the New Total Expense Ratio

Posted: 21 May 2019 Last revised: 30 Sep 2012

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: June 7, 2010

Abstract

This study presents the construct of a New Total Expense Ratio built upon the concept of normative transparency of disclosure. This construct presents the reality of adviser/distributor payments to brokers “behind the mutual fund curtain.” The source of these payments is fund and shareholder assets. The New Total Expense Ratio includes: (1) management fees, (2) distribution fees, (3) "other" expenses, and (4) transaction costs. Sub-categories are also included.

SEC adoption of the New Total Expense Ratio would foster significant prohibitions and changes in the huge payments mutual funds make to advisers, distributors, and brokers. However, adoption and recommended prohibitions and changes will require the concerted efforts of objective and proactive independent directors, fund advisers practicing stewardship, the (unlikely) support of the fund industry, and, finally, the political will for regulatory reform.

Keywords: Mutual Funds, New Expense Ratio, Expense Ratio, Normative Transperancy Of Disclosure, Management Fee

JEL Classification: G2, G23, G28

Suggested Citation

Haslem, John A. and Haslem, John A., Mutual Funds and the New Total Expense Ratio (June 7, 2010). Journal of Investing, Vol. 19, No. 2, pp. 22-26, Summer 2010, https://doi.org/10.3905/joi.2010.19.2.022, Available at SSRN: https://ssrn.com/abstract=1622007

John A. Haslem (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

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Washington, DC DC 20016
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202-236 3172 (Phone)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742
United States
202-387 2025 (Phone)

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