Glossary term
Total Expense Ratio
The annual fee a fund charges as a share of assets, covering management, custody, index licensing and administration. Usually written TER, or expense ratio in the US. It is deducted inside the fund’s net asset value every day; the investor never sees an invoice, only a slightly lower return.
AI-generated — produced automatically by Closelook’s systems under this site’s editorial policy.
What it means
The total expense ratio is the fund’s published running cost: 0.03% a year on the largest US S&P 500 funds, 0.20% on a typical world-equity UCITS fund, 0.50% to 0.75% on many thematic and emerging-market funds. It is taken pro rata from the fund’s assets each day, so a fund with a 0.20% fee tracks its index roughly 0.20% lower over a year before anything else happens.
What it leaves out
The ratio excludes the fund’s trading costs when the index rebalances, withholding taxes on dividends, swap fees, and the bid-ask spread and brokerage the investor pays to buy the fund. It also ignores income the fund earns on its own: securities-lending revenue and tax reclaims. The number that includes all of it is the tracking difference, which is why two funds with the same expense ratio can deliver returns a quarter-point apart.
How Closelook uses it
On Closelook’s ETF pages the expense ratio sits beside the tracking difference so the promise and the outcome can be read together. A fund whose tracking difference is smaller than its fee has earned part of the fee back; one whose difference is larger has costs the fee does not name.
Common questions
- Is the expense ratio the total cost of an ETF?
- No. It covers management, custody, licensing and administration. Rebalancing trades, withholding taxes, swap fees and the investor’s own spread and brokerage sit outside it. The tracking difference captures the fund-side costs the ratio leaves out.
- How is the fee charged?
- Pro rata every day inside the net asset value. There is no invoice; the fund’s return is simply lower by the fee over the year.