Want to invest but don’t know how to manage it? You can easily buy mutual funds or use investment management services. This investment management service can be provided by a general bank or an asset management company.
The services of these providers vary. From providing investment advice to helping you manage your assets. This service is performed by people who specialize in their field. So you don’t have to worry, however, you have to pay a management fee instead.
Definition of Management Fee
A management fee is a wage an investor pays to an investment management service provider.
The concept of management fees is widely used in the investing world in general. But it is the most familiar to mutual fund investors. The amount is also one Considerations for Investors in Choosing a Mutual Fund.
in mutual fund investment tools Management fees are part of Net Asset Value (NAV) Mutual funds provided to investment management companies to provide fund management services to investors. Since it is not charged directly, it is not surprising that many investors of this tool are unaware of the burden of this transaction.
The amount of investment management fees on this instrument varies from 0.4%-3.5% depending on the type of mutual fund being managed and the company’s investment policy. How much customer money management The higher the proposed management fee, the higher.
from multiple sources This management cost In addition to including the company’s operating costs It also includes marketing costs. The advantages of the Mutual Fund Affiliate (APERD) application are not based on investor transaction fees. But it depends on the investment manager’s marketing costs.
What about other investment tools? If you are interested in using the service hedge fund to protect your investment assets They generally charge a fixed 2% management fee and 20% of the total profit.
If you use the services of a bank or an investment company outside of this instrument You can ask about the percentage of this fee first. This is because the amount of service fees generally varies according to the services provided and the policies of each company.
Difference Between Management Fee and Expense Ratio
Another term that is often used in investments, especially mutual fund investments, is expense ratio. expense ratio is the ratio between NAV and management fees after the administration fee is added to other expenses.
These other expenses, such as accounting fees, or simply office repairs and office cleaning, and other things indirectly related to the quality of investment management, are good. expense ratio neither management fee It can be found in the fund information sheet of each mutual fund.
although not directly charged But the expense ratio is an important factor that investors need to know. The better the performance of the investment manager, the better it means. investment manager It takes very little cost to manage an investor’s total net asset value (NAV).
How are management fees calculated?
The management fee formula is Management Fee = Percentage of Management Fee Offered by Company x NAV
Company A offers a management fee of 1.5% with a total NAV of Rp 100,000,000. Therefore, the management fee that investors must pay to use the company’s services is:
Management Fee = 1.5% * IDR 100,000,000 = IDR 1,500,000
What about the expense ratio? The formula for calculating this variable more or less is as follows:
Expense Ratio = (Management Fee + Other Expenses)/Total NAV
For example, you use the services of Company A. It turns out that in addition to charging an administrative fee, The company also charges other fees equal to 1% of the total NAV, so your expense ratio is:
Expense ratio = ((1,5%*100,000,000) + (1%*100,000,000))/100,000,000
= 0.025 or 2.5%
The amount of investment management fees for mutual funds varies depending on the type and brand of the instrument. Should check the fund information of the product first. Here is a list of management fees for these instruments generally by type:
- Money Market Fund : 0.40% -1.00%
- Fixed Income Fund : 0.50% -1.25%
- Mixed Fund : 1.0%-1.50%
- Equity Fund : 2.00%-3.50%
- Mutual Funds Covered : 0.20% -0.75%
Investment fees in other mutual funds In addition to handling fees
Cost is one of the key elements that determine the high and low return on investment. Ideally, the amount of profit you earn is at least equal to expense ratio to be able to make a profit but in reality There are several types of mutual fund investment expenses that you need to be aware of. Here are some of them:
- Subscription fee: Fee charged by the investment management company to investors upon initial purchase of mutual fund products.
- Redemption Fee: Cost of Selling Mutual Funds Currently, many APERD applications do not charge this fee. These costs may still be available.
- Transfer Fees: Fees charged to investors if the custodian bank used to maintain the investment funds differs from the bank the investor uses to receive money from the sale of investment instruments.
- Custodian Fee: Custodian fee is the amount an investor pays for the services of a custodian bank. The custodian bank is the investor’s collecting party. Banks typically charge this fee once a year (every year).
The above investment costs can be minimized by choosing a mutual fund product that uses the same escrow bank as the bank you use on a daily basis. Investment management costs can be reduced by managing your investment portfolio independently.
However, independently managing investment funds is quite risky for novice investors. Especially novice investors who do not have enough time and skills to manage these financial assets.