Fund fees
Fees are one of the few return components known in advance. Over the long run, a fee gap turns into a capital gap.
Three kinds of fee apply to a Moroccan fund.
Management fee
Charged continuously against the fund's assets, expressed as an annual percentage. It pays the management company and the custodian. The published NAV is net of this fee: you never see it debited, but it reduces performance every day.
Subscription charge
Paid on the way in, as a percentage of the amount invested. Part may accrue to the fund, the rest to the distributor. Many funds charge 0 %.
Redemption charge
The mirror image of subscription, paid on the way out. Often nil, sometimes tapering with holding period to discourage in-and-out trading.
The compounding effect
On 100,000 MAD invested at 5 % gross per year for 10 years, a 0.5 % versus 1.5 % management fee makes a difference of roughly 15,000 MAD in final capital. For equal management skill, the cheaper fund wins.
Fees and classification
Management fees are structurally higher on equity and diversified funds than on money-market funds, where they can erase a large share of the expected return.
See also
- Net asset value and net assets
The price of a unit, how it forms and what it tells you.
- Reading fund performance
YTD, 1 / 3 / 5 years, cumulative versus annualised.
- The Sharpe ratio
Return per unit of risk, and how to read it.