Layered Fees

AAA

DEFINITION of 'Layered Fees'

Two sets of management fees that are paid by an investor for the same group of assets. This practice is found in many types of investment vehicles such as wrap funds, variable annuities, registered investment advisor client accounts and even mutual funds.

INVESTOPEDIA EXPLAINS 'Layered Fees'

Information about layered fees in an investment product should be stated in the prospectus. Layered fees should generally be avoided by an investor because paying money managers for assets they are not directing is wasteful.

However, layered fees should be considered if there is truly a case to be made for the primary manager to add value. There are several cases where paying a layered fee can be acceptable, such as:

1. Investments in foreign companies. This is because of the higher costs and complexities in investing in these companies directly.

2. A low cost ETF or other fund purchased to provide exposure to a commodity, such as gold or silver.

3. As a hedge, such as in the case of a short fund or interest rate instrument.

RELATED TERMS
  1. Incentive Fee

    A fee paid to a fund manager by investors. Incentive fees are ...
  2. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  3. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  4. Management Fee

    A charge levied by an investment manager for managing an investment ...
  5. Retail Investor

    Individual investors who buy and sell securities for their personal ...
  6. Money Manager

    A business or bank responsible for managing the securities portfolio ...
Related Articles
  1. Passing The Buck: The Hidden Costs Of ...
    Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of ...

  2. Mutual Funds Are Awesome - Except When ...
    Mutual Funds & ETFs

    Mutual Funds Are Awesome - Except When ...

  3. Don't Let Brokerage Fees Undermine Your ...
    Options & Futures

    Don't Let Brokerage Fees Undermine Your ...

  4. Will ETFs Eventually Replace Mutual ...
    Mutual Funds & ETFs

    Will ETFs Eventually Replace Mutual ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center