MERs
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Thread: MERs

  1. #1
    Junior Member
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    Jan 2017
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    MERs

    Hi All... just a couple of questions about MERs.

    If a MER on a fund is 2%, on what basis is it calculated? Is it removed from the amount invested, or the return amount?

    My basic understanding is that the MER % is removed from the return before the investor receives the return (ie., if the return was 8%, and the MER is 2%, the investor receives the 6% return back). Is this the case? If so, what if there was no return (or the fund lost money that year), how is a MER% calculated?

    Thanks in advance.


  2. #2
    Senior Member
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    MER is calculated on AUM (assets under management) and is subtracted from the performance of the fund before the net calculation is provided to the unitholder. A fund's performance consists of unrealized cap gains, realized cap gains, capitall losses, dividends on stocks, interest on bonds, etc. A fund will usually firstly try to pay for the MER by using realized cap gains, dividends and interest generated from the fund. If that is insufficient, the fund then sells assets in the fund to cover the bill.

    So it does not matter whether a fund has a positive or negative return to you... the MER is still paid from assets in the fund.
    Example 1: Gross return of a fund 8%... Net return to you after 2% MER is 6%
    Example 2: Gross return of a fund -2%... Net return to you after 2% MER is -4%

  3. #3
    Senior Member
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    The fee for managing and running the fund (the MER) is taken from the fund's holdings on a daily basis.
    It's calculated, and removed from, the total pot of all money invested in the fund. This includes any money that was invested plus any growth in the fund. As the fund grows, so does the absolute amount of fees collected.

    If the fund's investments drop in value, the fee is still calculated and removed daily from the total assets invested.
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  4. #4
    Junior Member
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    Thank you kindly for clearing that up!

  5. #5
    Senior Member My Own Advisor's Avatar
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    http://www.myownadvisor.ca/mer-ter-m...ent-fees-fwiw/

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