As the SEC prepares to examine 12b-1 fees, fundsters may want to prepare themselves to repel tacks from a new foe. In Friday's Wall Street Journal
"Fund Track" column, Ian Salisbury reports
that the Investment Company Institute
is arguing with the startup kaChing
over how much mutual funds actually cost.
| Paul Schott Stevens |
President and CEO
kaChing estimates that funds cost 337 basis points on average, while the ICI puts the figure at only 117 bps. Despite the obvious motivational and perspective difference -- kaChing competes with funds while the ICI serves as fund firms' advocate -- the discrepancy comes mostly from three factors: kaChing factors 94 basis points of average taxes while the ICI doesn't factor in taxes (the ICI notes that such taxes lower the eventual cash out taxes, though); kaChing includes 20 bps of trading costs while the ICI only include nine bps; and kaChing weighs all mutual funds equally in its methodology, while the ICI weights the average according to mutual funds' asset. (So big, lower cost funds from firms like Fidelity and Putnam have a bigger impact than tiny, niche mutual funds with high expense ratios.
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