What is meant by total expense ratio | TER

In the context of mutual funds, the concept of TER which stands for total expense ratio is crucial. It is a synthetic indicator of the cost of investment funds. It allows you to immediately assess using a value expressed in percentage points as they affect the management costs of capital managed by a specific company. In its calculation it includes all costs that are born by the subscriber. these include the management fee, any ancillary fees such as performance, the costs of the custodian bank, brokerage costs, certification of financial statements and in general administrative expenses.



Due to the fact that it needs to be represented as a percentage value and must be reported in the prospectus, with the TER at hand it is very easy to compare the cost levels of different societies. In keeping an eye on the value of the TER we must also pay attention to the fact that despite a contained management fee, performance fees are too high. Or ensure that portfolios are not too lively for the sole purpose of generating brokerage costs.

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