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Fund Management Fee and Expense Ratio
Old 03-01-2012, 11:24 PM   #1
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Fund Management Fee and Expense Ratio

My IRAs are in Vanguard's Wellington (VWELX) and Wellesley (VWINX), and up until now my Fidelity-held 401(k) has been in Spartan 500 (FXSIX [like FUSEX?]) largely because it's the lowest-expense fund available in my 401(k). As of now I adjust my Vanguard asset allocation to offset my rise and fall in my all-stock 401(k) to maintain my overall asset allocation target.

But of course my 401(k) keeps growing, so I'm looking into Wellington-like funds available to me at Fidelity to avoid the manual AA adjustments. Puritan (FPURX) seems a likely candidate, but I am confused as to what my expenses are.

I'm mildly confused about the expense ratios being listed as 0.60% or 0.59% "after reductions", but what really concerns me is a separate listing of "management fee" of 0.41%. I don't see this fee on Morningstar FPURX or this Fidelity FPURX page, but it is listed (screenshot snippet attached) when I'm logged into and looking at my investment options.

Is this management fee included in the expense ratio, or is it in addition to the expense ratio? If it's in addition, is it Fidelity charging me the fee or my company's 401(k) plan doing so?

I might talk myself into 0.6%, but if Puritan will cost me 1% I think I'll keep rebalancing manually.
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Old 03-01-2012, 11:26 PM   #2
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Yes, it's included.

Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
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Old 03-02-2012, 05:20 AM   #3
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Yeah, they sure don't make it very obvious from those descriptions, do they? But, yes, definitely included.
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Old 03-02-2012, 11:23 AM   #4
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The ER includes the management fee and is what the various contracts with the fund would allow them to charge the fund in expenses.

The ER after reductions is what is actually charged to the fund. In many cases, fund managers will waive charging a portion of the management fee to make the fund performance better/more competitive. Usually the concession is more than 1bp though, but I suspect that they want the fund to appear if someone is filtering for funds with an ER of less than .6%
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