Mutual Fund Total Cost Construct

The research provides the mutual fund Total Cost Construct that would provide “normative transparency of disclosure" to shareholders if adopted by the fund industry and by the SEC for fund reporting and disclosure. Full disclosure would enhance analysis to estimate each cost item for samples, say, of large-cap funds. Until disclosure of all cost items in the Total Cost Construct becomes a reality, cost items will be estimated piecemeal as individual fund and fund sample cost items become available or empirically estimated. The Total Cost Construct's categories include (1) Fund Management Fees (bps), (2) Fund Distribution Fees (bps), (3) Fund Trading Costs (bps), and (4) Fund Total Costs (bps). The categories and their numerous components and sub-components are included and defined, as are supplementary cost items. Before exploring the Total Cost Construct, the Partial Cost Construct is considered. The Construct's three categories include: (1) Fund Management and Non-Management Fees (bps), with two components and the latter with two sub-components; (2) Fund Trading costs (bps), with two components; and (3) Fund Total Costs (bps). Supplementary soft-dollar commissions and soft dollars are also estimated. The composition of the first category based on empirical research enabled the ability to estimate Fund Total Costs. The scope of the Partial Cost Construct reflects the SEC's limited menu of mutual fund reported cost items available for empirical research. The Construct is thus much less comprehensive in scope and detail than the normative Total Cost Construct, but it does provide a narrow-based estimate of Fund Total Costs