What is ‘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.
Explaining ‘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.
Further Reading
- Parent-subsidiary investment layers and audit fees – journals.sagepub.com [PDF]
- Gender dimensions of user fees: implications for women's utilization of health care – www.tandfonline.com [PDF]
- Tense layering and synthetic policy paradigms: The politics of health insurance in Australia – www.tandfonline.com [PDF]
- Applying Pricing Engineering for Electronic Financial Markets – www.tandfonline.com [PDF]
- Rural Fee Reform and the Changing Relationship between State and Peasant [J] – en.cnki.com.cn [PDF]
- Portable information record medium having liquid crystal and photoconductive layers – patents.google.com [PDF]
- Challenging Fanon: A Black radical feminist perspective on violence and the Fees Must Fall movement – www.tandfonline.com [PDF]
- Liability, Information, and Anti-fraud Investment in a Layered Retail Payment Structure – papers.ssrn.com [PDF]
