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CFA Level I · CFA Level I Exam · Portfolio Management: An Overview

A mutual fund charges a management fee of 1.00% of assets, and an investor holds the fund for several years. Compared with a fund charging an otherwise identical fee but also a 5% front-end load, the investor in the no-load fund is most likely to:

The no-load investor has more of the initial investment put to work. A front-end load is deducted from the amount invested up front, reducing the capital that earns returns, whereas the no-load fund invests the full amount, all else equal.

  1. Ahave less money invested on day one, because the fee is deducted from assets
  2. Bhave more of the initial investment put to work, all else equalCorrect
  3. Cearn a lower gross return, because loads improve performance

Explanation

A front-end load is deducted from the amount invested, so only 95% of the initial sum is invested. The no-load investor has the full amount working, all else equal. Loads do not improve gross returns.

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