Expense ratio

The Hindu Business Line  Sep 19  Comment 
The sharp cut in limits for total expense ratio will have a greater impact on players with more number of large-sized schemes
The Economic Times  Aug 12  Comment 
During 2017-18, mutual funds industry witnessed substantial growth in terms of inflow and asset base.
The Hindu Business Line  Mar 28  Comment 
But relief to investors may not be broad-based
The Hindu Business Line  Jan 22  Comment 
SEBI has recently asked mutual funds to reduce their TER or Total Expense Ratio. It may float a discussion paper on the subject. SEBI believes that reducing the TER will ensure that mutual fund invest...
The Hindu Business Line  Dec 12  Comment 
Capital market regulator SEBI plans to bring out a discussion paper on mutual funds expense ratio with the focus on ways to bring it down even as the inflows been growing leaps and bounds in last few ...
The Hindu Business Line  Feb 20  Comment 
Fund houses are also looking at getting more inflows through distributors. Quantum MF, for instance, said that it will now start paying distributors to sell its funds
The Economic Times  Feb 8  Comment 
In a communication to investors, the fund house said it would cut the expense ratios of its schemes as their assets under management (AUM) grow.


Expense ratio is the ratio of the expenses incurred by the management in order to run an Exchange Traded Fund (ETF) or a mutual fund divided the total assets held by the fund. In other words, it is the percentage of assets taken back by the management in order to run the fund.

Generally, the major expenses incurred by the fund are the management fees, which include mostly management fees and operating expenses, if any. Due to the fact that management fees take up bulk of the expenses, this ratio is also called the Management Expense Ratio. Another significant expense is the 12b-1 fees which is classified as marketing and promotion expenses under the FINRA rules. Other miscellaneous costs could be legal fees, auditing fees, accounting or recordkeeping and taxes, amongst others[1].

On average the expense ratio of an index fund (a passively managed fund) will be far lower than an actively managed mutual fund. Index funds seek to track the performance of a benchmark index (e.g. The Vangaurd 500 Index Investor tracks the performance of the S&P 500), meaning they generally refrain from trading except to keep the fund's portfolio in line with the benchmark index. In contrast, actively managed funds have much more freedom in ability to trade, and often trade frequently in search of market beating returns. As a result, operating expenses and thus the expense ratios are often larger for actively managed funds than for index funds.


  1. Investopedia
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