Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: The mutual fund industry has spent years trumpeting how costs have come down for investors. That’s true, but misleading. Asset managers haven’t exactly slashed their fees. Instead, the credit goes largely to investors—but some of them are being left behind. Regards, Ted https://www.barrons.com/articles/the-great-fund-fee-divide-1515214360
Here we go again. An article about fund fees presenting things that are usually true as if they were always true as a matter of law.
"The expense ratio includes ... the fee charged for managing the portfolio, which must be the same across all share classes."
"it’s worth noting that exchange-traded funds ... don’t charge a 12b-1 fee"
Wrong and wrong.
Some American Century funds charge a different management fee for retail (Investor) and institutional (Class I) shares, e.g. TWEIX (0.91%) vs. ACIIX (0.71%).
I suspect this goes back to its Twentieth Century days, when American Century charged a single all-in fee (usually 1.00%). The management took responsibility for covering marketing, administrative, and other costs. Instead of breaking out these costs as separate line items (and showing them as lesser costs on institutional shares), AC management still pays these costs. So the management fees are correspondingly lower for class I shares.
Then there are the Select Sector SPDR ETFs, e.g. XLK. 0.04% 12b-1 fee. The good news, if you want to call it that, is that these fees actually do go toward marketing, the original intent of 12b-1 fees.
“Even after accounting for how their funds are sold, there is still $663 billion in assets in funds charging above-average or high expense ratios, according to Morningstar Direct.”
Is the author suggesting that all funds should charge below average expense ratios? I’d like to see how that would work?
Suppose it’s theoretically possible everyone could vacate those funds charging above average fees. But if they did that, than those funds would cease to exist. So in the end, there’d still be funds left charging above average fees.
Comments
"The expense ratio includes ... the fee charged for managing the portfolio, which must be the same across all share classes."
"it’s worth noting that exchange-traded funds ... don’t charge a 12b-1 fee"
Wrong and wrong.
Some American Century funds charge a different management fee for retail (Investor) and institutional (Class I) shares, e.g. TWEIX (0.91%) vs. ACIIX (0.71%).
I suspect this goes back to its Twentieth Century days, when American Century charged a single all-in fee (usually 1.00%). The management took responsibility for covering marketing, administrative, and other costs. Instead of breaking out these costs as separate line items (and showing them as lesser costs on institutional shares), AC management still pays these costs. So the management fees are correspondingly lower for class I shares.
Then there are the Select Sector SPDR ETFs, e.g. XLK. 0.04% 12b-1 fee. The good news, if you want to call it that, is that these fees actually do go toward marketing, the original intent of 12b-1 fees.
Bloomberg, Feb. 2017, "Where Do SPDR Fees Go? Check the Madison Square Garden Ice"
https://www.bloomberg.com/news/articles/2017-02-08/where-do-spdr-fees-go-check-the-ice-at-madison-square-garden
Is the author suggesting that all funds should charge below average expense ratios? I’d like to see how that would work?
Suppose it’s theoretically possible everyone could vacate those funds charging above average fees. But if they did that, than those funds would cease to exist. So in the end, there’d still be funds left charging above average fees.