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Management Fee

Definition - What does Management Fee mean?

A management fee is the expense levied by asset managers. This fee allows them to compensate themselves for both their specialized professional skills and abilities, as well as the time spent on managing the assets. The fee may be comprised of the cost of asset administration as well as the investor communications. It is generally levied as a percentage of the value of assets managed, or as a percentage of revenue, subject to a certain minimum value, although other fee structures are also frequently found.

A management fee is an important feature of both professional investment management as well as asset/wealth management services. By comparing the fund fee of various mutual funds along with their track record, the investor can select an efficient fund.

Divestopedia explains Management Fee

Asset managers incur expenses in providing advice to investors regarding prospects versus risk involved with different investment schemes and asset purchases. They also conduct research in order to be able to predict the prospects of different sectors of the economy in various time frames. Some fund managers waive the fee in the eventuality of the fund not generating minimum return.

Typical annual figures for management fees are 0.75% to 0.5% of the net asset value of the unit, in the case of mutual funds. A management fee is also applicable for operating and managing resorts, hotel chains, offshore trusts and commercial establishments. The term fee, in these cases, refers to a periodic payment as percentage of revenue or profit.

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