0

I have read:

I believe SEC regulations also require a "fund of funds" to publish the expense ratio of the parent fund to include the weighted sum of the net expense ratios of the holdings.

Do SEC regulations require a "fund of funds" to publish the expense ratio of the parent fund to include the weighted sum of the net expense ratios of the holdings?


For example, Vanguard Target Retirement 2050 Fund (VFIFX) has an expense ratio of 0.15% and contains:

Fund Composition
Vanguard Total Stock Market Index Fund Investor Shares 54.30%
Vanguard Total International Stock Index Fund Investor Shares 36.60%
Vanguard Total Bond Market II Index Fund Investor Shares** 6.30%
Vanguard Total International Bond Index Fund Investor Shares 2.80%
Total 100.00%

Must the expense ratio of the Vanguard Target Retirement 2050 Fund (VFIFX) of 0.15% include the expense ratio of the 4 funds it contains?

0

SEC regulations require that fund managers include "acquired fund fees and expenses" as an added fee disclosure, which must be included in the comprehensive fee schedule found in the prospectus according to https://www.investopedia.com/terms/a/acquiredfundfeesandexpenses.asp

SEC Regulation and Disclosure

In January 2007 the Securities and Exchange Commission (SEC) began instituting new provisions to the Investment Company Act of 1940, which made it easier for fund companies to register fund-of-funds options. The SEC broadened legislation under Section 12(d)(1) of the 1940 Act for multi-manager funds. The SEC also revised its registration statement forms to include additional detail on the expenses for these funds. Specifically, registration statements now require that fund managers include "acquired fund fees and expenses" as an added fee disclosure requirement for multi-managers, which must be included in the comprehensive fee schedule found in the prospectus.

Prior to 2007, fund-of-funds investing was only allowed under specific circumstances approved by the SEC. In most instances, these fund-of-funds investments would report expense ratios of zero. Disclosure was misleading, presenting that there were no expenses and reporting that there would be operating expenses incurred by the various underlying funds in the portfolio.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.