Question

If New Fund’s expense ratio was 1.1% and the management fee was .7%, what were the total fees paid to the fund’s investment managers during the year? What were the other administrative expenses?

Short answer

Total fees paid = $15.4 million

Administrative expenses = $8.8 million

Step-by-step solution

Definition

In simple words, the term ‘administrative expenses’ are those expenses which are generally not related to company’s core function such as manufacturing, production etc On the contrary, these expense facilitate the company’s core functions.

Calculation of total fees paid and administrative expenses

Fees paid to investment managers were

=0.007 x $2.2 billion

= $15.4 million

Since the total expense ratio was 1.1% and the management fee was 0.7%, we conclude that 0.4% must be for other expenses.

Therefore, other administrative expenses were:

0.004 x $2.2 billion = $8.8 million