Wholesale Funds And Retail Funds

By FutureNestEgg | July 15, 2008

Most of us are familiar with Retail Managed Funds. The minimum investment for retail funds are anywhere between $1000 and $5000. The retail funds charge a management expense (called Management Expense Ratio) – usually between 2 and 2.5%. This is a substantial amount and can eat into a significant portion of the profits of the fund. This fee is unavoidable though. You do have to pay the managers for all the administration and maintenance of the fund. Since retails funds require such low levels of minimum investment, there will be a lot of investors in a fund and so these funds have a higher cost per dollar.

A lot of fund managers also run a wholesale version of a retail fund. The underlying investments and management strategy of the retail and wholesale fund will generally be the same. The difference though is in the minimum investment required. The wholesale funds require a minimum investment of anywhere between $20,000 and $100,000. This means with wholesale funds, money is taken in larger blocks – hence these funds have a lower cost per dollar. MER is much lower than retail funds. MER for a wholesale fund is usually at least 1% lower than that of its corresponding retail fund.