Total expense ratio

The total expense ratio (TER), also known as the 'expense ratio' is a way to capture the annual costs associated with running a fund such as a unit trust.

The total expense ratio (TER), also known as the 'expense ratio' is a way to capture the annual costs associated with running a fund such as a unit trust. Total costs include management fees, trading fees, legal fees, audit costs and other operational expenses. These are usually expressed as a percentage of a fund's assets.

So, for example, if total expenses are £20m and the fund has assets of £400m, the TER is ((20/400) x 100%) or 5%. Ideally as an investor you want a fund with a low TER as fees eat into returns. It is also worth noting that TERs do not always include all expenses some performance-related fees for example may be left out.

The lowest TERs tend to come with passive funds on a cheap exchange-traded fund (ETF),for example, they may be below 0.5% per year.

See also OCF (ongoing charges figure)

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023
Can I avoid IHT by stuffing all my money into a pension?
Personal finance

Can I avoid IHT by stuffing all my money into a pension?

The ditching of the lifetime allowance could enable millions of pension savers to avoid inheritance tax. We explain how.
20 Mar 2023