how do fund managers make money?

Answer 1

I can answer that question two ways.
A person or company that sells mutual funds on behalf of a company that has constructed them, gets paid a commission. For example: AGF may construct a family of funds but frequently has investment advisers from other firms sell them.
An actual manager of a fund (usually it is a group of persons working for a financial management company) get their compensation from the "management expense amount."
Look at link below. This should open to a Money Market fund by the TD Bank. When you scroll down to "General Description" heading, look for "MER: 0.94% as of December 31, 2006." This means that .94% is pulled off of your proceeds from the fund. The amount that you receive already has this taken off. MER = Management Expense Ratio
http://www.tdassetmanagement.com/Content/Products/MutualFunds/Funds/p_FundCard.asp?FID=9&PID=5&SI=3

Answer 2

The fund manager's salary is usually a small base salary plus a percentage of the fund's assets. That certain percentage can be found in the fund's website and is a part of the annual expense ratio you pay to the fund. For some funds, like the Vanguard Windsor II and Fidelity Magellan, shareholders give the fund manager extra money if he/she outperforms the market. If the manager under performs the market, he/she will a lower salary. If you are talking about a hedge fund, managers get a cut of the profits, usually 20%.

Answer 3

Most funds you purchase come in 3 types, A, B and C funds:

A funds - charge a commission when you purchase the funds, the commission goes to the fund manager - that is the fee they collect...that is how they make money

B funds - charge a commission when you sell the fund

C funds - charge a commission when you buy and sell the fund

Additionally the fund manager 'adjusts' the fund stock price as a way of assessing an additional fee. If you refer to finance.yahoo.com, and look at any FUND PROFILE on the bottom right corner of "PROFILE" you will see 'FEES & EXPENSES' ... '3 Yr Expense Projection' and 5 and 10 year projection. Those fees are assessed off the fund trading price (that is how the manager makes money off the buy and hold traders, if they buy a b share they pay no commission on the purchase, most funds - if you invest for a certain amount of time say 5 years - automatically transfer you to a-shares and you would not have a commission when you sell in that case, but they make money by expensing off the trading price of the fund).

Answer 4

If the fund makes money, they usually do considr ell. If the fund doesn't, they get fired.
Suppose the fund is worth 10 million, beginning of year. Now, consider, the cost of the manager's salary and staff, office space, overhead etc, and suppose this comes to 1 million. OK.
Now, At the end of the year the fund is worth 11 million. but it cost 1 million to do business. This is break even.
If the fund is worth 12 million, then the mgr did a fine job and the fund would probably give him a raise to keep him.
If at end of year fund is worth 9 million,
bye bye.

Answer 5

Fees for fund managers are usually paid two different ways. Sometimes a fee is paid for buying into the fund. So if you invest $2,000, you're charged a fee then and maybe your account only really starts with $1,800. The other way is to charge you a fee when you withdrawal your funds. That can be a per transaction fee or a percent of the amount withdrawn.

Answer 6

The first four answers are totally wrong.

The short explanation is there are internal fees, usually ranging from .09% to 2.00% and higher. This has nothing to do with loads (usually 3% - 7%). Loads are simply the sales commission charge to you for buying the funds. That's why so many investors only buy "no-load" funds.

Answer 7

They are just employees with a salary just like the rest of us.