Raymond Kerzérho July 20, 2023 Personal Wealth Posted vs. Forward-Looking MERs 2023-2024 ETFs and mutual funds report their Management Expense Ratio (MER) semi-annually in their Management Report of Fund Performance (MRFP). The reported MER is the sum of the fund’s total management fees, total operating expenses, and sales tax for the last year, all divided by the fund’s average assets for the period. Management fees cover the cost of managing the funds, whereas operating expenses cover the cost of audit, accounting, legal fees, custodial, valuation, and recordkeeping. The MER has become one of the key metrics on which investors evaluate their investment product options, but it can be misleading in cases where funds have changed their fees because the MER is a trailing metric. When a fund company releases an MRFP, it bases the MER calculation on historical data for the past 12 months. If the fund reduces its management fee on the date its MRFP reporting period ends, investors will not see the fee reduction fully reflected in the MER until the second next MRFP, one year later. If a fee change occurs before an MRFP release date, the MRFP will report a blend of the old and new fees charged to the fund. This creates a lag between the announcement of fee reductions and when the posted MER fully reflects the changes. Fortunately, investors can estimate an updated, forward-looking MER at the time that fund fee reductions are announced by looking at the MER over a period where management fees did not change, separating the management fees to estimate operating expenses and sales tax, and then adding those estimates to the new management fee. For example, the Dimensional Global 60EQ-40FI Portfolio had an MER of 0.32% and a management fee of 0.24% in 2021-2022 for an estimated operating cost of 0.08%. Based on the June 22nd, 2023, press release, this fund’s management fee has been reduced to 0.22% as of July 1st, 2023. The estimated MER going forward, then, is 0.30%. Following the same procedure, we can estimate the forward-looking MERs for all Dimensional Global Portfolios based on the July 2023 management fee reductions. Plus:Equals: Dimensional FundEstimated Operating Costs + Sales Tax*Management Fee as of July 1, 2023Forward-looking MER EstimatePosted MERGlobal Fixed Income (F)0.09%0.21%0.30%0.31%Global 40EQ-60FI Portfolio (F)0.10%0.22%0.32%0.33%Global 50EQ-50FI Portfolio (F)0.10%0.22%0.32%0.33%Global 60EQ-40FI Portfolio (F)0.08%0.22%0.30%0.32%Global 70EQ-30FI Portfolio (F)0.09%0.23%0.32%0.33%Global 80EQ-20FI Portfolio (F)0.09%0.23%0.32%0.35%Global Equity Portfolio (F)0.09%0.23%0.32%0.33% * This figure represents the difference between the fund management fee and its MER over a reporting period where the management fee remained unchanged. Source: PWL Capital, Dimensional Fund Advisors Canada Share: Facebook Twitter LinkedIn Email CIRO Advisor Report