> Your 0.5-1.5% management fee on an actively-managed mutual fund is partially going to pay salaries for the fund manager, and partially toward brokerage commissions, spreads, etc. for the trading itself.
Good post but your management fee isn't generally paying for crossing the spread. That's extra slippage.
It may show up as tracking error in the fund (the price was 10.25/10.26, the fund had to buy, it bought at 10.26 and the index trackers said the price was 10.255, it had 0.5c of slippage). But more likely the fund traded in the closing auction, there was only one price so it officially had zero tracking error, but the price was silently a little higher than it would have been if the fund wasn't buying.
Good post but your management fee isn't generally paying for crossing the spread. That's extra slippage.
It may show up as tracking error in the fund (the price was 10.25/10.26, the fund had to buy, it bought at 10.26 and the index trackers said the price was 10.255, it had 0.5c of slippage). But more likely the fund traded in the closing auction, there was only one price so it officially had zero tracking error, but the price was silently a little higher than it would have been if the fund wasn't buying.