# How to Calculate Management Fees

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An investment fund provides an opportunity for you to save and make money. While choosing the right fund, research on various fees that a fund charges. A management fee is the amount paid to the fund’s investment manager for investment portfolio administration. In some funds, the management fee may also include other administrative services provided to manage your fund, such as the printing of your prospectus and mailing services. Calculating a management fee depends on the specific fund you choose.

#### Tips

• Typically, a management fee represents a percentage of total assets under supervision. With that in mind, you can multiply the management percentage rate by the total sum of supervised assets to calculate the management fee.

A great place to start is to acquire the fund’s list of services. Get a brochure that shows the fees that a fund charges; this helps you decide on the suitable fund. Ask for this listing from the fund management company. You can get this list by mail from the company or download it from the company’s website.

Find out the technique the company uses to calculate its management fee. Seek to know what the company’s management fee entails; find out if the management fee includes administration charges and if it is listed separately. The technique used to calculate the fee is well expounded under the management fee heading or annual fee. The management fee is charged to pay the fund manager, while the administrative fee is charged on activities like mailing services that are not listed under the other expenses section.

## Calculate the Fees

To calculate your fee, first add up all the charges listed under the management fee. Some funds charge a management fee only, while others add administrative fees that are not included in the other expenses section. Find out if the fund charges the fee based on the asset’s size or charges a fixed fee regardless.

Calculate the management fee by multiplying the percent with total assets. The standard percentage management fee charged ranges from 0.5 percent to 2 percent per annum. For example, if the fund has \$1million in assets and fee charged is 2 percent, \$20,000 goes toward your fund management.

## Learn Industry Standards

Once you understand what you're paying, it can help to read and understand the different ways used to calculate the management fee in different types of funds. The techniques used to calculate the fee vary from one fund to another. In a hedge fund, if the management fee is 2 percent, it is calculated on the net asset worth of the fund. In private equity funds, the management fee is initially calculated on the investor's fund size during the commitment period, which ranges from four to six years. The technique for calculating the fee then changes to the cost incurred by the fund less investments made.

Mode of payment can also affect fees. The management fee is mostly charged on an annual basis, but can also be calculated and submitted monthly or quarterly depending on the management company.