Fee charged by Mutual Funds

Q&A: Questions & Answers
1

I was trying to estimate the fee charged by mutual fund. Therefore as an example I choose HDFC Midcap Opportunity fund and went to their website which gives some details of the expenses of the scheme. Please find below screenshot from the website of the Mutual fund

hdfc

These expenses are in addition to entry/exit load which we leave aside for the time being.

In relation to the above charges I have the following questions

  1. What is the difference between Current Expense Ration and Total Expense ratio?

  2. At what interval these charges make to account of unit holders? Why “daily net assets” is mentioned? Are these charges made to account on daily basis on pro rata basis?

  3. What is Investment Management Fees?

  4. How much is the service tax on Investment Management Fees?

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2

@pattu sir i think you are the apt person to help @Gaurav_Agarwal.

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3

Thanks for A2A @sunnysachdeva.
@Gaurav_Agarwal

The total expense ratio of a mf has several components. This will be deducted on a daily basis before the NAV is reported on paper (hence the need for daily assets) and actually deducted on a quarterly basis.

I have done some digging around with mf annual reports (get them from amc sites) and this may help with at least some aspects of your query:
Understanding the Total Expense Ratio of a Mutual Fund

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Thanks @pattu @sunnysachdeva

Taking hints from @pattu I have downloaded Annual repost for HDFC Midcap Opportunity Fund. It is for year 2010. Please download here - Annual Report 2009-10 (1.3 MB)

The two pages we need for analyses are below

hdfc_midcap_1
hdfc_midcap_1791Ă—894 92.7 KB

hdfc_midcap_2
hdfc_midcap_2831Ă—566 60.7 KB

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(All figures in Rs. Lacs)

Total expenses (as per table 1) = 4294
AAuM (Average daily net assets) = 112,808

Total expense as % of AAuM = 3.8%

I think this ratio is all that matters. The expenses of fund are approx. 4% of assets under management.

Also, we should dig in how do they calculate Average daily Net assets? I am trying to find out the latest annual report of this fund.

6

Annual report for HDFC Mid-cap opportunity can be found at this link.

(All figures in crore)
Total expense = 284
AAuM = 12,263

Total expense as % of AAuM = 284/12,263 = 2.3%

The expenses of fund have come down over the time.