Fee Structure

  

Categories: Banking, Managed Funds

See: Carry.

Note that the fee structure of any given investment fund just refers to how overpaid the General Partners of that fund will be. So in a "two and twenty" fee structure, the GPs are overpaid 2% per year as a management fee, whether they do well or not. And then they are paid 20% of the profits of the fund.

Other fee structures are way different. For an index fund, for example, it's a flattish fee of, say, 0.4% per year to manage a given sector fund. That's it. No notional profit participation or carry. No extra fees. Just a burger, fries, and a shake for $6.95, tyvm.

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Finance: What is a redemption charge?8 Views

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Finance allah shmoop what is a redemption charge All right

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well when you redeem shares of a mutual fund in

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a deferred commission purchase structure there's a charge like you're

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not paying your commission upfront you pay it later Remember

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that most mutual funds are sold as a shares meaning

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that the commission of the fund you're buying is paid

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up front That is if you've invested ten grand on

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a three percent up front commission structure while when you

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step up on the swimming pool starting blocks and the

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money is actively starting to be invested your actually starting

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the race with ninety seven percent of that ten grand

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or ninety seven hundred bucks with three hundred dollars having

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gone to the broker for the pleasure of selling you

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that fund but some mutual funds are sold as b

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shares where there is essentially an exit fee or rather

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where there is a charge when you redeem the fund

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either because you just want to sell it or you

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die in your estate liquidates it or martians kidnap you

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and force you at martian gunpoint to call in a

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sell order right Well in many cases redemption fees are

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waived if you hold the mutual fund some extended period

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of time like a year a few years five years

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something like that If you hold the fund an extended

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period the annual management fee paid to the people buying

01:23

and selling securities on your behalf can then cover the

01:26

broker's commission So the money managers aren't actually losing money

01:30

in the form of that three hundred dollar commission paid

01:32

you a broker who sold you ten grand of fund

01:35

only to have you three weeks later dump it and

01:37

move on to another funds Well there are other benefits

01:39

and having this system set up because it encourages mohr

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careful selection of mutual funds and longer duration in holding

01:47

them And yes the obvious marriage and dating allegories apply

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here But we just won't go So when you hop

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in bed with a given mutual fund read the fine

01:56

print because well all kinds of hidden feed germs exist

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in bedrooms airport bathrooms and glass elevators Well all around 00:02:02.98 --> [endTime] the world

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