Mutual Fund Expense Ratios

[QofQuimica]

Advertisement - Members don't see this ad

Can anyone explain to me what the difference is between net and gross expense ratios? Is it something to do with the funds being taxed? And if so, how is it that some funds have net ERs that are equal to their gross ERs?

 

[sazerac]

Can anyone explain to me what the difference is between net and gross expense ratios? Is it something to do with the funds being taxed? And if so, how is it that some funds have net ERs that are equal to their gross ERs?

The difference is not taxes, the difference is waivers and reimbursements.

The gross expense ratio ignores fee waivers, because they are often temporary in nature, usually existing when the fund is starting up. The net expense ratio includes the waivers, even if they are due to expire next year. Conceptually, the gross ratio is what the fund experiences, and the net ratio is what the customer experiences.

If the ratios are the same, the fund has no fee waivers or other gimmicks and is likely a larger and more mature fund.

http://wiki.fool.com/Mutual_Fund_Gross_vs._Net_Expense_Ratio
http://www.bogleheads.org/wiki/Expense_ratios

 

[QofQuimica]

Makes sense, thanks.