standard 2.A.5 says if actual direct trading expense can not be identified and segregated from bundled fee : 1.When calculating Gross of Fee returns, returns must be reduced by entire bundled fee or portion of bundled fee that inclused direct trading expense.Estimating trading expense is not permitted. 2. When calculating Net of Fee returns, returns must be reduced by entire bundled fee or portion of bundled fee that inclused direct trading expense and investment management fee. Estimating trading expense is not permitted. Question: Why do we deduct fee out of ‘‘net of fee’’ returns which already says NET of fee? I mean requirements are actually the same in both 1 and 2 above. Am i missing something simple?
Here lies the difference. Gross of Fee Returns = Gross Returns - Trading Expense Net of Fee Returns = Gross Returns - Trading Expense - Investment Management FEE