Updated Mainstay Marketfield fund expense ratio (lip)

mnzdedwards

http://www.nylinvestments.com/polos/MSMK01-051327011.pdf

Wow! Actual fund expenses that are borne by investors of the grandfathered I-shares are 2.94%. Wow!

What is also interesting is that the annual expenses for shorting securities is 1.18%. That's quite an expense to add on to the management fee.

Does this concern anyone or is it only the fund returns that matter? When do costs enter into the decision to buy, sell, or hold an investment? At what point do they become too high?

Mike_E

Old_Joe

I just checked my Schwab account, and according to them, the Gross Expense Ratio before waivers/reductions is in fact 2.94%, as you mention. However the Net Expense Ratio after waivers/reductions is shown as 1.76%, a bit more reasonable. Of course there is no guarantee that management will continue those "waivers/reductions" indefinitely. Certainly bears watching.

kevindow

According to my calculations, investors in this fund actually pay a 2.94% expense ratio. One must understand the exclusions (in bold) in the following statement from the prospectus:

"Effective October 5, 2012, New York Life Investment Management LLC ("New York Life Investments") has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) for Class I shares do not exceed 1.56% of its average daily net assets."


I really think all of this cryptic language is intentional on the part of the fund company, and is merely an attempt to understate the actual expenses paid by investors. Of course M* lists a front page ER of 1.53% and a net ER of 1.76% on the Expense page. Obviously the 1.53% and 1.76% figures are meaningless as nobody actually pays these expense ratios. This may be M*'s methodology, but it is clearly flawed and needs to be revised.

Investors need to know that there are real expenses associated with shorting and using leverage, and M* should report the actual expense ratio paid by investors on the front page and on the Expense page for all funds, including L/S funds. This method would level the playing field for expense reporting for all funds and would allow real apple-to-apple comparison of actual fund expense ratios.

Kevin

STB65

I agree that the expenses should be reported correctly by M*, and kevindow correctly points out the costs of shorting and leverage, but I was under the impression this was run along a hedge fund "model" without the "2+20" cost and the multi-million dollar buy in. M* gave it 5 stars and it was no load, no minimum at TDA, while the usual minimum was $5M for MFLDX, which is closed to new investors. It's up so far, and I'm waiting to see how it does in the next correction.
Since long term results usually depend on low fund expenses, this wouldn't be a core holding, but it seemed worth a modest investment. If they do well in the downturn, it may be worth more, if the managers really can "hedge." Ya gotta pay to play.