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Why does my fund list both an MER and management fee? Add to ...

Dear Nancy Woods

I am trying to control my costs and I have a mutual fund with an MER of 1.6 per cent and then it says a management fee of 1.25 per cent. Is the management fee part of the MER? I thought that an MER was the management fee. Are my costs a total of 1.6 or 2.85 per cent?

Please advise. Jill

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Dear Jill,

The MER, or Management Expense Ratio, consists of the management fee and all other costs associated with the running of the fund. It is calculated based on the value of the previous 12 months.

The management fee is the amount paid to the fund manager to make the investment decisions for the fund.

The other costs are items such as administrative costs and custodial fees.

Transactions cost are reflected as the trading expense ratio and are disclosed separately from the MER. You can find the TER for a specific fund on sedar.com under “search database" and select “management report of fund performance.” Enter the specific fund and the TER is listed in the document.

In your case, the cost you are paying is 1.6% plus the TER of your fund, not 2.85%.



Special note: Thanks to those who wrote to me to point out the TER. After 20-plus years in the investing business, I learned something new. The TER is another reason that investors should research and decide whether or not owning a mutual fund is netting them the performance and returns worthy of the hidden costs they are paying.



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Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com or visit her web site at nancywoods.com

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