Net Expense Ratio

Net Expense Ratio refers to the percentage of a fund’s Assets that are used for Operating Expenses, management fees, and other costs, after accounting for any waivers or reimbursements. It provides a clearer picture of the actual costs incurred by investors in a fund.

The formula for calculating the Net Expense Ratio is:

Net Expense Ratio = Total Fund Expenses – Fee Waivers / Total Fund Assets

Example:

• If a mutual fund has total expenses of $1 million and Assets of $100 million, the Gross Expense Ratio would be 1% ($1 million / $100 million).
• If the fund manager waives $200,000 in fees, the net expenses would be $800,000.
• The net Expense Ratio would then be 0.8% ($800,000 / $100 million).

Case: Consider two funds with similar performance. Fund A has a net Expense Ratio of 0.5%, while Fund B has a net Expense Ratio of 1.0%. Over time, the lower costs of Fund A could lead to higher net Returns for investors compared to Fund B.