Management Fees for Open-End Mutual Funds: Explained

Management Fees for Open-End Mutual Funds

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Question

Management fees for open-end mutual funds tend to be

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A. about 0.5 to 1.5% of NAV. The management fees tend to be larger for large funds than for small funds because of the quickly increasing bureaucratic costs associated with larger funds. This has encouraged the existence of thousands of small mutual funds.

B. about 1 to 2% of net asset value (NAV). The management fees are on a sliding percentage scale that increases with the size of the fund.

C. about 1 to 1.5% of NAV. The management fees tend to be larger for large funds than for small funds because of the quickly increasing bureaucratic costs associated with larger funds. This has encouraged the existence of thousands of small mutual funds.

D. about 0.4 to 1.2% of NAV. The management fees tend to be smaller for large funds than for small funds because of the substantial economies of scale that exist in managing financial assets.

E. about 0.25 to 1% of NAV. The management fees are on a sliding percentage scale that decline with the size of the fund.

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Explanations

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A. B. C. D. E.

Most management fees decline with the size of a fund. For example, a fund with assets of $500 million might charge management fees of 1%, a fund with assets of $1 billion might charge 0.75%, and a fund with assets of $6 billion might charge 0.25%.

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