What are trailer fees?
Trailer fees are fees payable to distributors (including financial advisors) who sell the fund to the investors. The trailer fees are generally paid out from a fund’s annual management fees (which is part of the total expense ratio1) by the fund manager or product provider to distributors. As such, trailer fees are not additional cost to end investors.
1 The expense ratio refers to the ongoing costs of operating a fund by fund managers/insurers expressed as a percentage of the fund's average net assets. Operating costs include investment management fees, trustee fees, and audit fees, etc.