Lipper: Fund Fees Going Up

October 29, 2002 (PLANSPONSOR.com) - Declining assets in stock funds are producing a hike in mutual fund management fees, according to a new Lipper report.

Helping to increase median management fees over their 2000 levels are arrangements between fund providers and investors that bump up fees if the assets in a client’s account decrease. These declines happened this year due to outflows and poor equity performance, according to Lipper.

The study examines management fees, which are an important component of a fund’s total expense ratio. The management fee compensates the fund’s manager and is deducted from the fund’s return before that return is reported to investors.

Management fees vary widely from one fund to the next, ranging from 0.02% of fund assets per year for one institutional index fund to 3.25% for a balanced fund that has an all-inclusive fee schedule.

The study also found that the number of funds that employ performance incentive compensation for the management company is on the rise. These compensation schemes are still uncommon,but are increasingly employed by the Vanguard Group and Fidelity, the two largest fund families, according to Lipper.

More information is available¬† on Lipper’s website .

«