Financial Dictionary - TER (Total Expense Ratio)
TER (Total Expense Ratio)
The TER measures the total costs of an investment fund. On top of management and deposit fees, it also includes certain operating and administrative expenses, legal costs, etc., incurred by the investment fund. The TER is public and can be consulted in the information provided by the manager and/or marketer. Investment funds are legally bound to stipulate their main fees in the official fund prospectus regulated by the CNMV.
The TER includes all the costs involved in a fund:
- Performance fee
- Legal fees
- Audit fees
- Other expenses
What's the purpose of the TER?
Each investment fund is different and the TER acts as a variable that makes it easier to compare the level of fees between one fund and another. Precisely because each is fund is different, it's important to segment or classify it so that the analysis is fair. Comparing the TER of funds in the same or similar category will help you decide whether the costs are reasonable or not.