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Is management fee included in expense ratio? How is a management fee charged and why is it that this important item does not get reflected in a fund's fact sheet?
- S K Singh
It is included. The expense ratio declared by the fund includes all expenses incurred by the asset management company including management fee, administrative expenses, distributor's commission, auditor's fee, custodian fees, costs related to fund transfer, trustee fees as well as marketing & selling expenses. The management fee is part of the total expense ratio disclosed by each fund, which is why it does not get reported separately in a fund's fact sheet. As per Section 52 of mutual fund regulations, apart from the normal expense ratio of 2.5 per cent, funds have been allowed charge an additional 20 basis points towards investor education initiatives and another additional 30 bps on gross inflows from smaller cities. A scheme may charge any fee upto this limit as its management fee.
This article was originally published on January 06, 2015.
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