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RiverPark Funds: Will their expense ratios ever go down?

claimui
edited September 2013 in Fund Discussions
It seems like the funds in the RiverPark family all have an expense ratio of at least 1.25% (for the retail class). RiverPark Short Term High Yield RPHYX has over $800 million in assets. I recall it was unlikely to lower its expense ratio because of the amount of work involved with its strategy, plus the inherent limit on its manageable assets.

However, RiverPark/Wedgewood RWGFX now has $1.1 billion in assets and doesn't seem like a particularly costly strategy, but it's expense ratio has been 1.25% since day one. 1.25% is not outrageous, but there are quite a few decent large cap offerings with lower expense ratios.

I would have thought RWGFX might have lowered its expenses over time, but given that the 1.25% seems to be the lower bound for all the RiverPark funds, perhaps they have no plans to reduce expenses for any of their funds, regardless of size?

Comments

  • TedTed
    edited September 2013
    claimui & Others; For your information. The expense ratios I just posted were for institutional shares, not retail
    Regards,
    Ted
  • msf
    If I'm reading the semi-annual statement correctly (this is a back of the envelope calculation), the current expenses would be about 1.18% but for the fee waiver.

    That's the way lots of fee waivers work. The management company agrees to a cap on the total expenses, waiving fees if necessary. But as "real" expenses drop, the management company gets paid back; consequently the total fund expenses don't decline. The normal management fee is 0.65%, and right now it looks like they're getting reimbursement payments that amount to an extra 10%, or about 0.07% "advisory waiver recapture".

    That means that if they had not waived the fees, they would not be reclaiming the money now, and the expenses would be about 0.07% lower.
  • InvestorInvestor
    Reply to @Ted: Expanse ratio of RWGFX which is a "Retail" class fund, is 1.25%. not Institutional class. Institutional class ER is 1.00% according to M*
  • Old_JoeOld_Joe
    edited September 2013
    According to Schwab, re RHYPX (Retail Class):

    • Gross Expense Ratio before waivers/reductions: 1.37%
    • Net Expense Ratio after waivers/reductions: 1.25%
    • Category Average: 1.14%
    • YTD Return as of 07/31: 1.79%
    • Distribution Yield (Trailing Twelve Month) 3.57%
    • Availability: Available to Existing Shareholders
  • InvestorInvestor
    Reply to @Old_Joe: Different fund. All explicitly stated expense ratios in the Opening Post is for RWGFX and that is a retail class fund. Ted must be commenting on RWGFX because ER for RPHYX is not stated at all.
  • Old_JoeOld_Joe
    edited September 2013
    Reply to @Investor: Understood- original post was broadly re RiverPark family- I noted RHYPX because that's the only RiverPark fund that we own.
  • msf
    Reply to @Old_Joe:
    See my post below. RPHYX is also paying the manager extra money - in the case of this fund, approximately 0.03% of AUM. That is, without the reimbursement of waived fees, the ER of the fund would currently be around 1.22%. Not a big deal, but indicative that sooner or later, expenses even on this fund should drop, if ever so slightly.
  • Old_JoeOld_Joe
    edited September 2013
    Yeah, I agree with you, but hope that you are not being overoptimistic about the eventual drop. Not holding my breath on that. See David's remarks below also on this one.
  • David_Snowball
    I don't believe that the RiverPark expenses will ever be classified as "low." You normally start with the management fee - the money that the investment managers receive for their services - since that rarely goes down as assets climb. Those range from 0.65 - 1.5%. Larger funds typically have "other expenses" in the 0.2% range. So a fund with a 1.5% management fee is unlikely ever to cost less than 1.7%. A fund with a 0.65% management fee might well end up costly under 1% as it grows, but only after it has reimbursed RiverPark for the losses they incurred running the funds when they were uneconomically small.

    The funds' Annual Reports and Prospectus contain a wealth of information on the subject (RiverPark Wedgewood incurred $40k in printing costs, RiverPark Large Growth just $2,000).

    The RiverPark folks believe that they are bringing hedge fund-style products to "the mass affluent." They believe that they've chosen managers carefully, that they reward them richly enough to lure them over from the Dark Side, and that they produce value in excess of expenses. That is, they quite earn what they're paid. As a result, I suspect that RiverPark won't voluntarily get involved in a "rush to the bottom" when it comes to expenses but that they'll try to stay reasonable.

    For what it's worth,

    David
  • Old_JoeOld_Joe
    Reply to @David_Snowball: Sounds right to me.
  • NickF
    It looks like the expense ratio will drop by the end of the year for RWGFX. Looking at the RiverPark semiannual report, it looks like the fund charged $178K for advisor waiver recapture over the last 6 months and there is another $37K left it can claim over the next 2 years (this is on a fee base of. My read is that fee should level off at around 1.15% in a year or so, and there isn't room for it to go much lower than that.

    Also, it looks like RPHYX will burn through the its advisor waiver recapture by 2016, at which point the expense ratio will drop (but not by a lot).
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