What is an 'Exit Fee'

An exit fee is a fee charged to investors when they redeem shares from a fund. Exit fees are most common in open-end mutual funds. When exiting a fund, an investor may have to pay a redemption fee along with any back-end sales loads associated with their share class.


Exit fees can be associated with a transactional sales charge or a redemption expense. Exit fees for mutual funds are determined by the fund company. Some funds will be structured with back-end sales loads providing commission fees for the intermediary broker. Fund companies also structure share classes to require a redemption fee, which is a charge that is credited to the share classes' expenses.

Back-End Sales Loads

Back-end sales loads are paid to intermediaries and structured as part of a share class’s sales commission schedule. These charges can be a static percentage fee or they may be contingent deferred. Static back-end sales loads are in effect for the duration of a holding and charged as a percent of assets transacted. Static back-end sales loads are typically lower than front-end fees, averaging approximately 1%. Contingent deferred back-end fees decrease over the life of the investment. They may even expire after a specified time period, in which case a share class could be eligible for a reclassification.

Redemption Fees

Redemption fees differ from back-end sales loads since they are associated with the fund’s annual operating expenses. Mutual fund companies integrate redemption fees into their fee schedules to mitigate short-term trading of mutual fund shares. Redemption fees are typically only in effect for a specified time period, which can range from three months to approximately one year. If an investor does choose to redeem shares during the specified time period, the fee helps to offset the transactional expenses associated with the redemption and also helps to protect other investors from higher per share expenses overall.


Back-end sales loads and redemption fees are typically expressed and charged as a percentage of assets. An open-end mutual fund is required to disclose its sales load schedule as well as its operating fee schedule and any redemption fees in its prospectus.

Exit fees can also be charged by other types of funds, including hedge funds, annuities and limited partnership units. These funds will provide fee disclosures in various forms. Therefore, it is important that investors understand the fees involved for investing in and redeeming their investments.

  1. Level Load

    An annual charge deducted from an investor's mutual fund assets ...
  2. Advisor Fee

    An advisor fee is a fee paid by investors for professional advisory ...
  3. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
  4. Fee

    A fee is a fixed price charged for a specific service and is ...
  5. Investor Shares

    Investor shares are mutual fund shares structured for investment ...
  6. Foregone Earnings

    Foregone earnings are the difference between earnings actually ...
Related Articles
  1. Investing

    Why Are ETF Fees Lower Than Mutual Funds?

    Discover all the reasons ETFs typically have lower fees than mutual funds, including their passive management and the absence of load and 12b-1 fees.
  2. Financial Advisor

    Investment Fees: How to Understand Them

    There can be a variety of fees levied when investing. Here's a look at what they are and how to manage them.
  3. Investing

    ETFs vs. Mutual Funds: The Lowdown on Costs

    Confused about the full range of fees on ETF and mutual funds? Here's a quick guide on fees and expenses.
  4. Retirement

    401(k) Fees You Need To Know

    Many workers are largely unaware of the various fees that their plans charge them, or what the fees are for.
  5. Investing

    Investors: Your Fees Are Probably Too High

    The lower your fees, the higher your returns. Here's how to find out if you're paying too much for your investments.
  6. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  7. Investing

    The Costs of Investing

  8. Investing

    3 Investment Fees That Are Negotiable

    Investment fees are a necessary evil but that doesn't mean they have to be overly costly. There are ways to negotiate some of the expenses down.
  9. Personal Finance

    Do You Know How Your Financial Advisor Is Paid?

    It is important to understand how your financial planner is compensated.
  1. Where do I look for fees that I am charged on investments? What are those fees called?

    The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment ... Read Answer >>
  2. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
  3. What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center