The ongoing fees charged by a fund. It is a percentage of the amount being managed, so if your investment is £10,000 and the TER is 1% then you will pay £100 per year to the fund manager. The cheapest funds which are usually, passive share funds, have a Total Expense Ratio of 0.07% while the most expensive, which are usually actively managed funds, can be over 3%. This payment has to cover many things.
Primarily the fee covers the management cost, which is how the fund manager generates its revenue, but also incorporates the many costs of running a fund. These include charges for trading the assets in the fund, valuing and safekeeping of the fund’s assets, accounting for and handling distribution of dividend payments, paying for compliance expertise to ensure the fund sticks to the regulator’s guidelines, producing and maintaining regulatory information documents, customer servicing, auditor fees, IT costs…