Gross Expense Ratio (GER)

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Gross Expense Ratio (GER)

What it is

The gross expense ratio (GER) is the percentage of a fund’s assets used to cover its operating costs. It reflects the total annual expenses charged by a mutual fund or ETF before any fee waivers, reimbursements, or recoupments are applied.

Key points

  • GER includes management fees, administrative costs, 12b‑1 fees, and other operating expenses.
  • GER excludes sales loads and brokerage commissions.
  • The net expense ratio is the GER after applying waivers, reimbursements, or recoupments.
  • GER typically ranges from about 0% to 3%; passive funds (index funds/ETFs) tend to have lower GERs than actively managed funds.
  • High GERs reduce investors’ net returns over time — compare GER and net expense ratio across similar funds.

How GER works

The GER shows a fund’s total cost structure before temporary or contractual reductions. Fund sponsors sometimes waive or reimburse fees (especially for new funds) to lower the net expense ratio offered to investors. Those waivers may be time‑limited or subject to recoupment, so the net expense ratio can rise when waivers end. Comparing GER and net expense ratio helps reveal how much cost relief is temporary.

GER affects performance because expenses are paid out of fund assets. All else equal, a higher GER lowers the fund’s net return available to shareholders.

Examples

  • AB Large Cap Growth Fund (Class A, example): gross expense ratio 0.65%, net expense ratio 0.64% (0.01% fee waiver). Management fee ~0.51%. Invests primarily in 50–70 large‑cap U.S. growth stocks.
  • T. Rowe Price Equity Index 500 Fund (example): passive fund tracking the S&P 500 with gross/net expense ratio ~0.19% and some contractual fee waivers in place.

How to use GER when choosing funds

  • Compare GER and net expense ratio across funds with similar strategies and benchmarks.
  • Check whether fee waivers are contractual and how long they last; treat temporary waivers as likely to expire.
  • For long‑term investors, prioritize lower ongoing expense ratios, particularly for passive exposures where low cost is a major benefit.
  • Consider GER alongside other factors (tax efficiency, tracking error, turnover, performance, and fund size).

Bottom line

The gross expense ratio reveals the full operating cost of a fund before temporary reductions. It’s a key metric for assessing how fees will affect returns — always compare GER and net expense ratio and consider the likelihood that waivers or reimbursements will continue.