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The Total Expense Ratio (TER) provides investors with a clearer picture of the total annual costs involved in running an investment fund. The TER consists principally of the manager's annual charge, but also includes the costs for other services paid for by the fund, such as the fees paid to the trustee (or depositary), custodian, auditors and registrar. Collectively, these fees are known as the "additional costs".
TERs on actively managed funds are typically between 1 per cent and 2 per cent, while tracker funds charge 0.5 per cent or less. It is likely that large funds will have lower TERs than small funds, that funds investing in overseas markets have higher TERs than UK funds and that new funds will show higher costs than old funds. However, the principal difference in TERs is whether the fund manager has a higher or lower annual charge. 
As it sounds, this is a measure of what a fund costs to run. Typically it includes the annual management charge, plus other charges incurred in running the fund. These can include share registration fees, legal fees, custodian fees etc. Trading costs are not included. 
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