The management expense ratio — MER — is the annual cost of a fund or an ETF, expressed as a percentage of assets. It has one feature that makes it easy to underestimate: you never see it. No invoice, no visible withdrawal — the fees are taken inside the fund, and the return shown is already net of them.
The mechanism
An MER of 1% means that roughly 1% of the investment's value is taken each year to cover the fund's management, administration and taxes. The deduction is continuous and proportional: the larger the investment grows, the larger the amount taken grows with it.
The arithmetic consequence is the key point: an annual percentage compounds over time, exactly like a return — but in the opposite direction.
A neutral worked example
Two fictional investments of $10,000, the same hypothetical gross return of 6% per year, over twenty years. Only the MER differs:
- MER of 0.20%: net return ≈ 5.80% — after twenty years, about $30,900.
- MER of 2.00%: net return ≈ 4.00% — after twenty years, about $21,900.
- Difference: about $9,000 on a $10,000 stake — nearly the original stake — for an annual difference that looked slight (1.8 points).
The gap does not come from a difference in skill between the funds in the example — the gross return is identical by assumption. It comes solely from the compounding of fees over twenty years.
Where to find the MER
Every fund publishes its MER in its disclosure documents (Fund Facts, the manufacturer's site). Two reading nuances:
- the MER is sometimes accompanied by a trading expense ratio (the fund's internal transaction costs), published separately;
- comparing MERs only makes sense between comparable products — two funds with different rules provide different services, and the gap between their fees measures something other than a simple difference in efficiency.
What this changes for your tracking
The unit price Everyfolio tracks is already net of the MER: the fees are inside, invisible in the price history. That is precisely why they deserve to be known from the fund's documentation — portfolio tracking will never show them.
Official sources
The MER appears in the Fund Facts document, a disclosure document governed by the Canadian Securities Administrators (CSA).
- CSA — Types of Fees: https://www.securities-administrators.ca/investor-tools/understanding-your-investments/types-of-fees/
- CSA — Fund Facts: https://www.securities-administrators.ca/investor-tools/understanding-your-investments/fund-fact/
Informative, general content — not personalized advice. For your situation: your institution or an advisor.