Disclosures for Wealthfront Mutual Fund Fee Research
The Management Fee, Marketing Fee, Non Management Fee, Sales Load and Redemption Fee (collectively, “Mutual Fund Fees”) data shown for actively managed mutual funds in the accompanying table are derived from a private study prepared for Wealthfront Corporation (“Wealthfront”) by staff of Lipper Inc., a Thomson Reuters Company, and are the arithmetic, or “simple,” average and the asset weighted average of Mutual Fund Fees charged by all retail, actively-managed U.S. domestic equity mutual funds excluding all index funds, funds of funds and ETFs for such period, as determined by that study. Lipper Inc.’s averages for each fee component are calculated on the entire population of actively managed mutual funds. The arithmetic averages are lower than the average Mutual Fund Fees published in the Investment Company Institute’s 2010 Investment Company Fact Book (the “ICI Fact Book”), which are asset weighted based on the total amount of assets invested in U.S. mutual funds and are the averages widely quoted in the mutual fund industry. Wealthfront believes the arithmetic average more accurately represents the array of mutual fund choices available to an investor making an initial investment than the asset weighted average, because Wealthfront believes the arithmetic average is a better statistic to evaluate the broad choice of existing mutual funds available to investors vs. the asset weighted average which is a better indication of where the assets are already invested.
To the extent that a client selects a manager who charges fees higher than the average shown, the difference between the actual fees that such investor pays to Wealthfront and the average Mutual Fund Fees shown will be less.
The Opportunity Cost on Embedded Tax Liability data was prepared by Wealthfront based on information in Unconventional Success, by David F. Swenson (Free Press, 2005), Taxes in the Mutual Fund Industry (Lipper, 2009) and the ICI Fact Book.
The foregoing data, while based on facts and sources that Wealthfront believes are reliable, represent Wealthfront’s opinion only. Such data have not been reviewed, compiled or audited by an independent public accountant.
In particular, Wealthfront cautions investors that the Opportunity Cost Associated with Embedded Tax Liability represents only an opportunity cost and not an actual, out-of-pocket cost. Such amount represents what Wealthfront believes is the lost opportunity to invest over a period of five years the average taxes imputed to a new investor in a mutual fund on the fund’s income and gains before such investor’s investment, as determined and calculated by Wealthfront. This opportunity cost assumes that such taxes, as calculated by Wealthfront, were invested at the average return of the S&P 500® Index over the thirty years ended December 31, 2010, that the average mutual fund generating such taxes will incur gains and not losses and that the investor to whom such taxes are imputed will hold its mutual fund investment for five years. An investor who invests in a mutual fund that has an unrealized loss will incur an opportunity benefit rather than an opportunity cost. An investor who holds a mutual fund investment for longer than five years may receive a greater benefit from such tax effects and an investor who holds a mutual fund investment for fewer than five years may receive a lesser benefit from such tax effects. Any such tax effects are inapplicable to mutual funds held in tax-free or tax-deferred accounts.