united-states finance fees sec
Do SEC regulations require funds of funds to include in the expense ratio of the parent fund the weighted sum of the expense ratios of the holdings?
<p>I have <a href="https://redd.it/ktocav" rel="nofollow noreferrer">read</a>:</p>
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<p>I believe SEC regulations also require a &quot;fund of funds&quot; to publish the expense ratio of the parent fund to include the weighted sum of the net expense ratios of the holdings.</p>
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<p>Do SEC regulations require a &quot;fund of funds&quot; to publish the expense ratio of the parent fund to include the weighted sum of the net expense ratios of the holdings?</p>
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<p>For example, <a href="https://investor.vanguard.com/mutual-funds/profile/VFIFX" rel="nofollow noreferrer">Vanguard Target Retirement 2050 Fund (VFIFX)</a> has an expense ratio of 0.15% and contains:</p>
<div class="s-table-container">
<table class="s-table">
<thead>
<tr>
<th>Fund</th>
<th>Composition</th>
</tr>
</thead>
<tbody>
<tr>
<td>Vanguard Total Stock Market Index Fund Investor Shares</td>
<td>54.30%</td>
</tr>
<tr>
<td>Vanguard Total International Stock Index Fund Investor Shares</td>
<td>36.60%</td>
</tr>
<tr>
<td>Vanguard Total Bond Market II Index Fund Investor Shares**</td>
<td>6.30%</td>
</tr>
<tr>
<td>Vanguard Total International Bond Index Fund Investor Shares</td>
<td>2.80%</td>
</tr>
<tr>
<td>Total</td>
<td>100.00%</td>
</tr>
</tbody>
</table>
</div>
<p>Must the expense ratio of the Vanguard Target Retirement 2050 Fund (VFIFX) of 0.15% include the expense ratio of the 4 funds it contains?</p>

<p>SEC regulations require that fund managers include &quot;acquired fund fees and expenses&quot; as an added fee disclosure, which must be included in the comprehensive fee schedule found in the prospectus according to <a href="https://www.investopedia.com/terms/a/acquiredfundfeesandexpenses.asp" rel="nofollow noreferrer">https://www.investopedia.com/terms/a/acquiredfundfeesandexpenses.asp</a></p>
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<h2>SEC Regulation and Disclosure</h2>
<p>In January 2007 the Securities and Exchange Commission (SEC) began instituting new provisions to the <a href="https://www.investopedia.com/terms/i/investmentcompanyact.asp" rel="nofollow noreferrer">Investment Company Act of 1940</a>, which made it easier for fund companies to register fund-of-funds options. The SEC broadened <a href="https://www.sec.gov/rules/final/2006/33-8713.pdf" rel="nofollow noreferrer">legislation</a> under Section 12(d)(1) of the 1940 Act for multi-manager funds. The SEC also revised its registration statement forms to include additional detail on the expenses for these funds. Specifically, <strong>registration statements now require that fund managers include &quot;acquired fund fees and expenses&quot; as an added fee disclosure requirement for multi-managers, which must be included in the comprehensive fee schedule found in the prospectus.</strong></p>
<p>Prior to 2007, fund-of-funds investing was only allowed under specific circumstances approved by the <a href="https://www.investopedia.com/terms/s/sec.asp" rel="nofollow noreferrer">SEC</a>. In most instances, these fund-of-funds investments would report <a href="https://www.investopedia.com/terms/e/expenseratio.asp" rel="nofollow noreferrer">expense ratios</a> of zero. Disclosure was misleading, presenting that there were no expenses and reporting that there would be operating expenses incurred by the various underlying funds in the portfolio.</p>
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