The Hunt- How are the daily returns and fees calculated?

[cyoa1fan]

I'm dedicating this Post to finding how daily returns, rates and fees are calculated. What is FV is cover a lot other threads but this one is dedicated to specifically-

1) How are daily rates calcualted?

2) How are daily returns calculated?

3) What fees are we being charged?

I'll kick it off with this link. If anyone can find me more I would be thankful- The Hunt is on.

http://www.access.gpo.gov/nara/cfr/waisidx_04/5cfr1645_04.html



Choose Your Own Adventure

 

[nelsonal]

I'm not sure what you mean by daily rates or daily returns. Fees are:
Plan administrative fees (the cost of a help desk/thrift line), rebalancing order processing, statements, websites hiring an actuary to sign off on the plan once a year etc. Those can be found in the annual reports. 2006 is here:
http://www.tsp.gov/forms/financial-stmt.pdf
2007 will be out soon.

It's best to think of fees as similar to an iceburg. Some fees are more visible than others. Those are charged against the NAV of the funds. Since the line item above is rebates of management expenses those appear to include management fees. Those are the portion of the iceburg above the water. (That's how expense ratios are calculated).

After this, when managing the funds (buying and selling), custotial fees, etc direct expenses are realized. These commissions, fees, etc, are the first layer of the submerged iceburg. It's costly to calculate them so they rarely are, these are the first contributors of tracking error.

In addition to these fees, when large purchases are made (even in very liquid assets), markets move. Since the TSP covers so many employees and large swaths tend to be paid at the same time, large investments in the C and I funds (and relatively large investments in companies that make up the S fund have to be made). This is akin to the deepest (and widest) part of the ice burg, they're real costs but they go to other traders and market makers (who are compensated for providing the liquidity that allows trading to take place).