EXPENSE RATIO

A fund’s expenses are typically defined as a percentage of the assets. A fund’s expense ratio is the percentage of assets required to operate the fund.

  • Expense ratios vary by fund, but typically decrease as the assets in the fund increase.

  • Many asset-based fees have tiered schedules that decrease as assets increase.

  • Fixed expenses comprise an increasingly smaller percentage of assets as assets grow.

Expenses impact the performance of the fund and are a key consideration for investors, survey companies and distribution platforms. A fund’s expense ratio should be competitive with funds that have similar investment strategies.

EXPENSE CAP

Many funds choose to have an Expense Cap which limits the percentage of the fund's assets that can be used to operate the fund.

  • Expense caps are defined by fund management and vary by fund type, strategy, investments and other factors.

  • If actual fund expenses are greater than the expense cap: the advisor will waive all or a portion of their advisory fee to pay the expenses or the advisor will pay the expenses out of their pocket if waiving all of the advisory fee does not cover the expenses.

  • The advisor may decide to waive a portion of their advisory fee for any number of reasons. This will reduce the fund’s expense ratio, but allow the advisor to earn the full advisory fee once the voluntary waiver expires.