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Just Answers - Unit Trust Fees: Hidden and Unhidden Costs
Sales Charge/Service Fee/Front-End Load
Whatever the term is, they all refer to the charges you pay when you invest in a unit trust. The bulk of money goes to the marketing and distribution of the fund. Generally, sales
Whatever the term is, they all refer to the charges you pay when you invest in a unit trust. The bulk of money goes to the marketing and distribution of the fund. Generally, sales
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
charges are reflected in the difference between the buying (bid) and selling (offer) prices and are stated as a percentage of the fund's net asset value (NAV).
A few funds in the market state the sales charges as a perce
A few funds in the market state the sales charges as a perce
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
tage of the selling price; in this case, you're paying more comparatively as the selling price is higher than the NAV in a front-end load fund.
Currently, average front-end load for equity funds is 5%. For bond, fixed in
Currently, average front-end load for equity funds is 5%. For bond, fixed in
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
come and money market funds usually come with a small front-end load or none at all, or an exit fee.
Back End Loads/Exit Fees/Repurchase Charge
Back-end loads or exit fees are charged when you redeem your units in the fu
Back End Loads/Exit Fees/Repurchase Charge
Back-end loads or exit fees are charged when you redeem your units in the fu
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
d. In this case, the buying price is lower than the NAV.
Some back-end loads, typically those of bond funds are charged if you redeem your units before a specified period - the fee is scaled down progressively the longer
Some back-end loads, typically those of bond funds are charged if you redeem your units before a specified period - the fee is scaled down progressively the longer
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
you hold on to the fund.
The advantage of a back-end load is that all your money goes to work immediately. However, if the exit fee is levied against the NAV when you sell (as opposed to the original invested amount) an
The advantage of a back-end load is that all your money goes to work immediately. However, if the exit fee is levied against the NAV when you sell (as opposed to the original invested amount) an
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
if you have invested for capital gains rather than income distribution, part of your profits is eaten up as well.
Management Fees
The fund company makes money from the management fees. Cited as a percentage of the fund
Management Fees
The fund company makes money from the management fees. Cited as a percentage of the fund
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
's assets, the annual management fee is accrued daily and paid out of the fund.
Management fees for equity-oriented funds tend to be higher than those for fixed income funds. Distributors may get a small percentage of th
Management fees for equity-oriented funds tend to be higher than those for fixed income funds. Distributors may get a small percentage of th
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
annual management fee, referred to as a trailer fee. US personal finance magazine Kiplinger says management fees for US mutual funds are typically 1% and above.
However, management fees for passively managed funds like
However, management fees for passively managed funds like
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
index-linked funds should be lower.
Trustee Fees
Trustees act as custodians of the fund and their job is to safeguard the interest of the investors. To do this, they're paid a trustee's fee, which is accrued daily. For
Trustee Fees
Trustees act as custodians of the fund and their job is to safeguard the interest of the investors. To do this, they're paid a trustee's fee, which is accrued daily. For
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
an equity fund, the trustee's fee is typically 0.08% to 0.2% per annum.
Switching Fees
Given the volatility in markets, rebalancing is the latest investing mantra. Rebalancing involves adjusting the asset allocation in
Switching Fees
Given the volatility in markets, rebalancing is the latest investing mantra. Rebalancing involves adjusting the asset allocation in
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
portfolio. If you rebalance with funds within the same unit trust management company, you may incur switching fees.
Switching between funds involves the transfer of investment from one fund to another. When 'free' swit
Switching between funds involves the transfer of investment from one fund to another. When 'free' swit
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ches are offered, no fee will be charged for switching from one fund to another.
However, sales charges or front-end fees will still apply in some cases. For example, you'll be charged this fee when you buy into a no-loa
However, sales charges or front-end fees will still apply in some cases. For example, you'll be charged this fee when you buy into a no-loa
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
bond fund and then switch to an equity fund with a sales charge of 5%. If there's an upfront fee for both fixed income and equity funds, check whether you'll be charged the difference in up-front fees, or if you're buyin
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
g at the fund's selling price and paying the whole sales charge again.
Typically, if you switch between equity funds, you'll not incur the upfront fee again as most equity funds are priced similarly. If you switch from a
Typically, if you switch between equity funds, you'll not incur the upfront fee again as most equity funds are priced similarly. If you switch from a
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
equity fund to a no-load bond fund, there'll also be no applicable sales charges and you buy at the NAV.
Once you exhaust the number of free switches offered in one year, there's often a switching fee, which is usually c
Once you exhaust the number of free switches offered in one year, there's often a switching fee, which is usually c
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
harged as 1% of the repurchase proceeds or in the form of a flat fee.
Management Expense Ratio (MER)
The MER is an indication of the costs of managing the fund. All fees incurred and deducted from the fund, including an
Management Expense Ratio (MER)
The MER is an indication of the costs of managing the fund. All fees incurred and deducted from the fund, including an
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
ual management fees, trustee fees, audit fees, commissions paid to brokers and printing costs; are all expressed as a percentage of the fund's net assets. MERs are important because these expenses can continue long after
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
the up-front fee has been paid.
However, MERs can vary from company to company and category of funds. Larger funds can have lower MERs as economies of scale are achieved. Index funds should also have MERs that are lower
However, MERs can vary from company to company and category of funds. Larger funds can have lower MERs as economies of scale are achieved. Index funds should also have MERs that are lower
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
than those of their actively managed peers' as less research is required of them; for instance, in the US, the Vanguard S&P Index Fund which has a hefty $78 billion under management, has a total expense ratio of only 0.18%
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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