Let us say a fund as a management fee of 2%, how is this paid to the manager? Do they liquidate some assets at the end of the year and thus suddenly reduce NAV in order to get their 2%? Do they do this regulary and the effect on NAV is not noticed?
Mutual funds keep some cash at hand to handle redemptions, fees and in case a good investment opportunity occurs.
Many funds skim 1/12th of 2% each month,
Yes, the fees takes a toll on the NAV.
By the way, the 2% is not kept totally by management. A portion of that goes to dealers in the form of trailing fees.
thank you for the answer and your time 
My pleasure!
I would imagine that this is the case. It is taken out of the fund’s cash balance.
They probably also skim off of the net contributions to the fund. Let me explain.
Say that investor A contributes $150 to the fund, and investor B withdraws $100 from the fund. The net effect is a $50 contribution. This can be used to purchase investments or run the fund. So if there are more-or-less constant net contributions, they can run the fund without having to liquidate assets.
Mutual funds accrue management fee expense on a DAILY basis. You will not see any large hit to the NAV monthly or EOY. You may see a cash transfer if you had access to the books relieving that liability, but nothing wild or crazy goes on.
Only time I have seen an issue with funds needed to pay out management fees is with side pocketed investments in alternative structures, but they usually just hold the liability until there is enough liquidity available to sell some at a reasonable price/liquidate the holding & close the side pocket
thanks to all that contributed , greenman I appreciate your response but I just did not understand it. Feel free to elaborate.
thanks
Yayywork is correct, the management fee is accrued daily, as are other expenses to the fund. Since distributions are calculated as a percentage of net income, you could say that they are indirectly taken out of your dividend you receive on your shares.
I think Greenman is talking about cash management to accomodate redemptions from the fund, which isn’t really how the management fee is paid. Cash positions are maintained so the fund won’t need to sell any securities if investors take lots of money out.
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