Total expense ratio

The total expense ratio (TER) is the percentage of the costs and fees of a fund in the average fund assets for a financial year. All the costs that arise at the expense of the fund’s assets, barring transaction costs, are taken into account. Costs incurred on the part of the investor, such as the issuing premium, are also not included in the total expense ratio. However, other expenses included in the statement of operations are taken into account in the total expense ratio.1

In addition to the management fees, these include expenses that accrue to third parties such as:

  • Marketing expenses
  • Costs for valuer
  • Costs for Auditor
  • Legal fees
  • Fees for depositaries (formally custodian banks)2

The German Investment Funds Associations suggests the following formula for calculating the total expense ratio:

TER = GKn / FV * 100

Key:
TER = total expense ratio in %
TCn = total costs not including transaction costs
FV = average fund volume in the reporting period

The average fund assets are taken as the arithmetic mean of values at regular reference dates. The regularity is to be chosen once and maintained.3
The purpose of calculating the total expense ratio is to make the fees for each investment vehicle transparent in order to ensure comparability of the individual products. Based on this, investors can assess the cost efficiency of fund management and take this factor into account in their investment decision.4


  • 1 Vgl. BVI Bundesverband Investment und Asset Management e.V. (2015): BVI-Wohlverhaltensregeln. Abrufbar im Internet. URL: http://www.bvi.de/fileadmin/user_upload/Statistik/TER_auszug.pdf. Stand: 16.10.2015.
  • 2 Vgl. Schumacher, Christoph; Pfeffer, Tobias; Bäumer, Hubertus (2011): Musterrechnungen. In: Schumacher, Christoph; Pfeffer, Tobias; Bäumer, Hubertus (Hrsg.): Praxishandbuch Immobilienfondsmanagement und -investment, Köln, S. 875-884.
  • 3 Vgl. BVI Bundesverband Investment und Asset Management e.V. (2015): BVI-Wohlverhaltensregeln. Abrufbar im Internet. URL: http://www.bvi.de/fileadmin/user_upload/Statistik/TER_auszug.pdf. Stand: 16.10.2015.
  • 4 Vgl. INREV (2015): Guidelines. Definitions. Total expense ratio (TER). Abrufbar im Internet. URL: https://www.inrev.org/guidelines-tool/site/module/101/definitions. Stand: 18.10.2015.
© 2019 CORPUS SIREO
http://www.corpus-sireo.com/en/glossary/total-expense-ratio
: 18.09.2019