Comments on: Management Fee versus MER – NOT THE SAME THING! http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/ A personal finance blog written by Preet Banerjee Wed, 23 May 2012 17:49:11 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: Brian Baker http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-11927 Brian Baker Sat, 21 Jan 2012 17:55:44 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-11927 @Preet Thx, Preet. Makes a lot of sense under the circumstances. i guess you don't always find out those details by glancing at Ann Stats and MFRPs. @Preet Thx, Preet. Makes a lot of sense under the circumstances. i guess you don’t always find out those details by glancing at Ann Stats and MFRPs.

]]> By: Preet http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-11926 Preet Sat, 21 Jan 2012 13:14:49 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-11926 @Brian Baker Hi Brian, I haven't looked at that fund specifically, but in 2010 many money market funds slashed their fees mid-year due to the low interest rate environment as many were yielding 0% (or less) after their fees. Since it was a tough sell to get advisors to put people into a money market fund with a guaranteed return of 0% or less, many fundco's did this. @Brian Baker Hi Brian, I haven’t looked at that fund specifically, but in 2010 many money market funds slashed their fees mid-year due to the low interest rate environment as many were yielding 0% (or less) after their fees. Since it was a tough sell to get advisors to put people into a money market fund with a guaranteed return of 0% or less, many fundco’s did this.

]]> By: Brian Baker http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-11920 Brian Baker Thu, 19 Jan 2012 07:01:49 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-11920 I noticed today on Globefund.com, a CIBC Money Market fund (Class A units) with an MER of .36%, but a management fee of 1%. The MRFP states on P. 4, that the 2010 MER was .27% and the MER before waivers or absorptions was .38%. How can the MER before absorptions still be less than 1%? [The fund has been around since 1988] I noticed today on Globefund.com, a CIBC Money Market fund (Class A units) with an MER of .36%, but a management fee of 1%. The MRFP states on P. 4, that the 2010 MER was .27% and the MER before waivers or absorptions was .38%. How can the MER before absorptions still be less than 1%? [The fund has been around since 1988]

]]> By: Preet http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-11911 Preet Tue, 17 Jan 2012 06:54:14 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-11911 @Jim Fishwick According to a simplified prospectus (which seem to have identical wording between fund companies on this section), the table showing the Feed Indirectly Borne by the Investor assumes a 5% straight line growth after factoring in the MER. Since MERs are actually deducted more than just once a year, the final numbers will be off slightly since you are taking away money from the funds regularly (which impedes growth slightly versus just charging the MER at the end of the year). @Jim Fishwick According to a simplified prospectus (which seem to have identical wording between fund companies on this section), the table showing the Feed Indirectly Borne by the Investor assumes a 5% straight line growth after factoring in the MER. Since MERs are actually deducted more than just once a year, the final numbers will be off slightly since you are taking away money from the funds regularly (which impedes growth slightly versus just charging the MER at the end of the year).

]]> By: Jim Fishwick http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-11910 Jim Fishwick Tue, 17 Jan 2012 03:14:11 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-11910 I am confused as to how the return on a Mutual fund is shown. In your example of a fund showing a 5% return for a year, is this after the MER has been factored in? Is your investment now worth $1050? Or in the case of a MER of 2.5%, would the investment now be worth $1025? Thanks, Jim I am confused as to how the return on a Mutual fund is shown. In your example of a fund showing a 5% return for a year, is this after the MER has been factored in? Is your investment now worth $1050? Or in the case of a MER of 2.5%, would the investment now be worth $1025?

Thanks, Jim

]]> By: Preet http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-10759 Preet Thu, 01 Dec 2011 04:51:14 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-10759 Hi Brian - actually no, the main reason for MER absorption is during the early stages of a fund when it has few assets. This is to prevent the fund from showing a high looking MER. Some expenses are fixed, other are variable. So when a fund has $1 million in assets, but costs $500,000 to run, the MER would show as 50%. But when the fund has $100 million in assets, but costs were $1 million, then the MER would be 1%. The management company will eat some of the costs early on to make the MER look closer to where they would like it to be when there are more assets in it. Hi Brian – actually no, the main reason for MER absorption is during the early stages of a fund when it has few assets. This is to prevent the fund from showing a high looking MER.

Some expenses are fixed, other are variable. So when a fund has $1 million in assets, but costs $500,000 to run, the MER would show as 50%. But when the fund has $100 million in assets, but costs were $1 million, then the MER would be 1%. The management company will eat some of the costs early on to make the MER look closer to where they would like it to be when there are more assets in it.

]]> By: Brian Baker http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-10758 Brian Baker Thu, 01 Dec 2011 04:46:37 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-10758 Hi Preet, Thanks for that great clarification. Is it fair to believe that MER excesses are more likely to be absorbed when a fund is not performing as well as it could? Hi Preet,
Thanks for that great clarification. Is it fair to believe that MER excesses are more likely to be absorbed when a fund is not performing as well as it could?

]]> By: Preet http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-410 Preet Mon, 28 Sep 2009 19:42:34 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-410 @Antony - if you look up the MRFP from CIBC you will see that the actual MER was 1.61% for 2008. They then absorbed part of these costs to bring down the MER to 1.00% for 2008. So your example is anomalous because there were fee absorptions after the fact. http://www.cibc.com/ca/pdf/mutual-funds/annual-mrfp/mrfp-cibc-usindex.pdf @Antony – if you look up the MRFP from CIBC you will see that the actual MER was 1.61% for 2008. They then absorbed part of these costs to bring down the MER to 1.00% for 2008. So your example is anomalous because there were fee absorptions after the fact.

http://www.cibc.com/ca/pdf/mutual-funds/annual-mrfp/mrfp-cibc-usindex.pdf

]]> By: Antony Pranata http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-409 Antony Pranata Sun, 27 Sep 2009 16:52:25 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-409 Hi Preet, I'm still confused. I looked at CIBC US Index fund on globefund.com. It says that MER is 1.08% and management fee is 1.20%. This is another example that management fee is higher than MER. Hi Preet, I’m still confused. I looked at CIBC US Index fund on globefund.com. It says that MER is 1.08% and management fee is 1.20%. This is another example that management fee is higher than MER.

]]> By: Free Investment Management : WhereDoesAllMyMoneyGo.com http://wheredoesallmymoneygo.com/management-fee-versus-mer-not-the-same-thing/#comment-408 Free Investment Management : WhereDoesAllMyMoneyGo.com Tue, 04 Aug 2009 20:29:23 +0000 http://symbiantcapital.com/2008/01/14/management-fee-versus-mer-not-the-same-thing/#comment-408 [...] MERs (Management Expense Ratios) being very low on index tracking ETFs (for example Vanguard charges a piddly 0.07% MER on VTI - [...] [...] MERs (Management Expense Ratios) being very low on index tracking ETFs (for example Vanguard charges a piddly 0.07% MER on VTI – [...]

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