Mutual fund fees likely to rise, experts say

Baltimore Sun

Brace yourself: Your mutual fund fees are likely to rise next year.

Management fees often are tied to the amount of assets in a fund. The more money in the fund, the lower the fees. But with the plunge in stock prices and investors pulling cash out of funds, assets have been falling.

It’s easy these days to forget about fees when your fund might have lost 40 percent or more in the past year.

But fees matter over the long run, and you can end up with a lot less money even if you’re paying what seems to be only slightly more for a fund.

Funds often have “break points,” where management fees are lowered once assets climb to certain levels.

For instance, a fund might lower its management fee from 0.6 percent to 0.5 percent once its assets reach $1 billion, and then lower it again to 0.3 percent once assets top $10 billion, says Russel Kinnel, director of mutual-fund research at Morningstar Inc.

“Now they’re triggering a lot of break points in the opposite direction,” Kinnel says.

On top of that, other expenses that are also part of a fund’s annual expense ratio — such as services provided to the fund by third parties — might go up slightly, Kinnel says.

Fund experts say it’s too early to tell how high fees might go.