The costs of fund management and all the other expenses involved with operating the fund, from unit price calculations to the safekeeping by the fund’s custodian, are spread between all the investors in proportion to the amount money they have put in. The amount of the key expenses and fees charged to the fund assets is usually reflected in the total expense ratio. It is measured as a percentage of the total value of the fund’s assets and is published in the fund’s annual report. Total expense ratios are also often published by financial media and specialist web sites offering information on and comparisons between different funds.
The exact amount of the total costs depends on many factors, such as the size of the investment fund – the costs of larger funds are borne by a larger investor base and therefore will probably make up a smaller proportion of the fund’s net assets. Funds that use complex investment strategies may pay a higher fee to the manager; those that invest in developing markets may have to pay higher settlement costs for their transactions. As a rule, money market funds are less expensive than bond funds, which in turn are cheaper than equity funds. Because passive funds that replicate indices do not take active investment decisions, their management fees tend to be lower than those of actively managed funds.