Thursday, December 23, 2010

Total Expense Ratio

Total Expense Ratio (TER) is the ratio of all expenses charged during the year, annualised, and divided by the average funds under management. For example if total fees charged were $25 and average funds under management were $1000 then the TER would be 2.50%. The TER should be calculated to capture all expenses, including direct charges and indirect charges such as fund expenses e.g. trustee and custodian fees. The TER allows comparison between managed fund products on a like for like basis, and tells an investor how much they really pay as a proportion of their funds, and how efficient the fund manager is. It is important that investors understand what they are paying for their investment, particularly as compared to returns.

Synonyms: Management Expense Ratio, Fund expenses, Fund fees
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