|**Table 5:**Total mutua|l fundfees and ex|pensesinth|e US,2000|-2005 (basi|s points)||
|---|---|---|---|---|---|---|
|**Fees and expenses**|**2000**|**2001**|**2002**|**2003**|**2004**|**2005**|
||||**Stock**|**Funds**|||
|Load fees (annualized)|30|25|24|23|22|22|
|Expense ratio|98|99|100|99|95|91|
|Total fees and expenses|128|124|124|122|117|113|
||||**Bond**|**Funds**|||
|Load fees (annualized)|27|22|20|20|20|20|
|Expense ratio|76|74|73|74|72|70|
|Total fees and expenses|103|97|93|94|92|90|
||||**Money Ma**|**rket Funds**|||
|Load fees (annualized)|n .a.|n.a.|n.a.|n.a.|n.a.|n.a.|
|Expense ratio|49|47|45|43|42|41|
|Total fees and expenses|49|47|45|43|42|41|

Notes: Fees measured as asset weighted averages. The expense ratio is the amount of expenses that a fund charges its shareholders every year. n.a. means not available. Source: Investment Company Institute (2006).

# **III.2. Expenses and Profits**

**Table 6:** Reformed LAC countries: Operational <u>expensesxpensespensesnsesses of PFAs, 2000f PFAs, 2000s, 2000 2000000 and 2006nd 2006d 2006 2006006</u>

Overall, there has been a **Table 6:** Reformed LAC countries: Operational dramatic decline in the operational costs <u>expensesxpensespensesnsesses of PFAs, 2000f PFAs, 2000s, 2000 2000000 and 2006nd 2006d 2006 2006006</u> **Country Per member Over assets** of the pension fund industry (Table 6), **<u>(US$) (%)</u>** accompanied by increasing returns on **<u>2000 2006 2000 2006</u>** equity to fund managers but smaller <mark>Argentina 75.80 26.95 3.12 1.04</mark> changes in the fees charged to Bolivia 18.16 5.48 1.37 0.24 affiliates.<sup>23</sup> Operational expenses per <mark>Chile 34.52 38.37 0.60 0.33</mark> Colombia n.a. 39.56 n.a. 1.66 contributor show even greater dispersion <mark>Costa Rica n.a. 16.72 n.a. 2.53</mark> across countries than fees. In Argentina, El Salvador 76.43 17.34 13.44 0.74 they are about five times higher than in <mark>Mexico 42.22 25.55 4.34 1.43</mark> Bolivia. Expenditures were particularly Peru 31.32 39.54 2.60 1.08 high in the early years of the reform due <mark>Dominican Rep. n.a. 8.35 n.a. 1.88</mark> to small asset and affiliate bases as well <u>Uruguay 53.14</u> 20.69 <u>3.79 0.58</u> <mark>Total 48.34 28.18 2.27 0.96</mark> as important inception-related costs, Mean 47.37 23.85 4.18 1.15 such as marketing costs incurred by <u><mark>Std. deviation</mark></u> <mark>22.32 12.46 4.29</mark> <u><mark>0.73</mark></u> pension fund managers with the hiring Note: n.a. means not available. of sales agents to attract affiliates, and Source: AIOS. restrictions imposed by regulators on transfers of affiliates across PFAs.<sup>24</sup> Marketing costs remain high in many countries and, in 2006, they accounted for about 26 and 11 of total operating expenses of pension fund managers in Mexico and Argentina, respectively, but have declined substantially in Chile to 4 percent (AIOS 2006). In contrast with most LAC systems, marketing costs as a share of total operating costs in Hungary have been small (about 2.1 percent of the total operating costs in 2004).<sup>25</sup>

> 23 Lasaga and Pollner (2003), for example, analyze the case of Peru.

> 24 See Table A2 and Table A3 in Appendix 1.

> 25 It is possible that some marketing activities are performed by other companies in the same financial group and the associated costs are hidden in the asset management fee (IMF and World Bank 2005a, page 16).

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