The difference between a (total) expense ratio as opposed to an annual
management charge in regard to unit funds has been raised in a couple of
threads recently. The former is often quoted for "mutual" funds in the
states and is nearly always quoted for ETFs; it is supposed to give the
total cost of administering the fund including trading expenses,
management charges, custodial expenses and everything else. In Ireland,
things are slightly less transparent as the life companies don't seem to
have a statutory obligation to quote a TER and most often quote a
management charge but are seemingly allowed to charge many other
expenses against the fund - for example trading expenses.
I thought it would be a useful exercise to try to work out the actual
total expense ratio of a unit fund and compare it with the quoted
management charge. This is not possible for most unit funds such as
managed funds, consensus funds, etc. as you need a benchmark to compare
the performance of the units against. Really it is only possible for
trackers of well known indexes which have publicly available historical
data. You also need some historical unit prices for the fund. Because
I own some, the fund I picked for this exercise was Quinn's Euro
Freeway which is publicised as being a DJ Eurostoxx 50 tracker. The
Stoxx web site has daily historical prices for the index and I rooted
through some old statements of mine to get historical unit prices for
the Euro Freeway. Unfortunately I only have three unit prices with a
gap of about two and a half years between the newest and the oldest.
The initial results are very favourable - over the period in question
the "lag" of growth for the units seem to be around 1% annualized
compared to the index which means that Quinn are indeed offering
excellent value given that the expense ratio of the underlying ETF is
probably more than .25% per annum.
However I would like to widen the window a bit before drawing a definite
conclusion. Does anyone have old unit prices for the Euro Freeway - pre
2003 for example? The older the better.
management charge in regard to unit funds has been raised in a couple of
threads recently. The former is often quoted for "mutual" funds in the
states and is nearly always quoted for ETFs; it is supposed to give the
total cost of administering the fund including trading expenses,
management charges, custodial expenses and everything else. In Ireland,
things are slightly less transparent as the life companies don't seem to
have a statutory obligation to quote a TER and most often quote a
management charge but are seemingly allowed to charge many other
expenses against the fund - for example trading expenses.
I thought it would be a useful exercise to try to work out the actual
total expense ratio of a unit fund and compare it with the quoted
management charge. This is not possible for most unit funds such as
managed funds, consensus funds, etc. as you need a benchmark to compare
the performance of the units against. Really it is only possible for
trackers of well known indexes which have publicly available historical
data. You also need some historical unit prices for the fund. Because
I own some, the fund I picked for this exercise was Quinn's Euro
Freeway which is publicised as being a DJ Eurostoxx 50 tracker. The
Stoxx web site has daily historical prices for the index and I rooted
through some old statements of mine to get historical unit prices for
the Euro Freeway. Unfortunately I only have three unit prices with a
gap of about two and a half years between the newest and the oldest.
The initial results are very favourable - over the period in question
the "lag" of growth for the units seem to be around 1% annualized
compared to the index which means that Quinn are indeed offering
excellent value given that the expense ratio of the underlying ETF is
probably more than .25% per annum.
However I would like to widen the window a bit before drawing a definite
conclusion. Does anyone have old unit prices for the Euro Freeway - pre
2003 for example? The older the better.