Expense ratio

Expense ratio is the US disclosure analogue to Canada's MER. It captures the management fee and recurring operating costs a fund charges against its assets each year, quoted as an annual percentage. Like MER, it's deducted incrementally from fund NAV rather than billed separately — the investor sees a return that's already net of it.

The headline number in US fund filings is usually labeled "net expense ratio" and sometimes includes a fee waiver the fund manager is voluntarily providing. The "gross expense ratio" is what the fund would charge absent the waiver; if the waiver expires, costs revert to gross.

Broad US index ETFs have been compressed by competition: several flagship equity index ETFs charge 0.03%-0.10%. Factor and thematic ETFs run higher (0.15%-0.50%), and active ETFs can approach mutual-fund pricing.

A key structural difference from Canadian MER: US expense ratios do not include any sales tax. Canadians comparing a US-listed ETF's expense ratio directly against a Canadian ETF's MER are comparing pre-tax to post-tax; the gap is larger than it appears.