A mutual fund charges an amount for the services it provides to the shareholders. The only aim of a mutual fund is to earn the best possible return for the shareholders year after year. A team of analysts work under the fund manager to constantly look for new opportunities. A mutual fund also has to hire a team to do the necessary paperwork and to prepare reports for the sponsors, trustees, custodians , regulators and the shareholders.
Most of the mutual fund companies outsource the transfer agency related work. A few mutual fund companies maintain in-house transfer agency division. Be it maintaining a in-house division or outsourcing of the transfer agency work, a fund requires the spend a certain amount each year.
All these expenses are collectively known as operating expenses. A good mutual fund always strives towards reducing the operating expenses. A fund makes up for these expenses by charging fees from the shareholders. The NAV is calculated after deducting the fees from the asset under management.
Types of Fees charged by a mutual fund