--- title: Comparing Investment Funds by Performance and Cost description: A practical guide to evaluating investment funds using Sharpe ratios, Total Expense Ratios (TER), and genuine Alpha generation in 2026. url: https://ginity.vn/en/blog/comparing-funds-by-performance-and-expense-ratios canonical: https://ginity.vn/en/blog/comparing-funds-by-performance-and-expense-ratios markdown: https://ginity.vn/en/blog/comparing-funds-by-performance-and-expense-ratios.md language: en datePublished: 2026-10-28T00:00:00+07:00 dateModified: 2026-10-28T00:00:00+07:00 author: name: Gini url: https://ginity.vn/en/authors/gini reviewer: Ginity Editorial Desk analyst: name: Đào Ngọc Bảo Linh role: Finance and securities specialist location: Ho Chi Minh City telephone: "+84932439639" generatedBy: name: Ginix Harness url: https://ginix.vn desk: id: learn name: Learn investing url: https://ginity.vn/en/learn tickers: [] sources: - name: State Bank of Vietnam (SBV) url: https://www.sbv.gov.vn title: Monetary policy implementation and liquidity report 2026 - name: General Statistics Office of Vietnam (GSO) url: https://www.gso.gov.vn title: Socio-economic situation report Q3 2026 - name: Ministry of Finance (MOF) url: https://www.mof.gov.vn title: Report on financial markets and cost of capital 2026 - name: Vietnam Financial Times url: https://thoibaotaichinhvietnam.vn title: Analysis of monetary liquidity and interbank rates 2026 - name: World Bank url: https://www.worldbank.org title: Vietnam macro-economic update report 2026 publisher: Ginity attribution: 'Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content.' disclaimer: "Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources." usageTerms: https://ginity.vn/ai.txt --- # Comparing Investment Funds by Performance and Cost > A practical guide to evaluating investment funds using Sharpe ratios, Total Expense Ratios (TER), and genuine Alpha generation in 2026. Gini · Learn investing · 2026-10-28 · https://ginity.vn/en/blog/comparing-funds-by-performance-and-expense-ratios _Lead analyst: Đào Ngọc Bảo Linh · Finance and securities specialist · Ho Chi Minh City · 0932 439 639_ ## Key takeaways - Fund track records require verification across 3 to 5-year market cycles rather than relying on the trailing 12-month return. - A Sharpe ratio above 1.0 point confirms that a portfolio generates meaningful excess return relative to the volatility borne by investors. - An annual Total Expense Ratio gap of 1.5% can erode more than 25% of accumulated portfolio wealth across a 20-year horizon. - Sustained positive Alpha over the first 9 months of 2026 separates genuine stock-picking skill from simple market beta. Selecting an investment fund involves much more than sorting a leaderboard by the highest percentage gain over the past few quarters. A fund showing spectacular short-term gains often signals nothing more than excessive risk concentration, aggressive portfolio leverage, or temporary luck during a narrow sector rally. When market winds shift, those same high-flying vehicles frequently suffer the deepest drawdowns. Building an enduring wealth accumulation strategy requires an objective framework to unpack fund results. Evaluating collective investment vehicles demands looking at multi-cycle compounded annual growth rates, risk-adjusted returns through the Sharpe ratio, the drag of Total Expense Ratios (TER), and managerial value-add through Jensen's Alpha. This multidimensional approach provides clarity on whether a management team truly creates excess wealth or merely levies heavy fees on routine market beta. ## 1. Evaluating Multi-Year Total Return Cycles According to official published data from the State Bank of Vietnam (sbv.gov.vn), A widespread analytical mistake among individual investors is evaluating mutual funds or exchange-traded funds (ETFs) solely through their 12-month trailing return. Capital markets move through distinct monetary cycles, alternating between liquidity expansion, policy tightening, and corporate earnings recalibration. A fund that surged 30% over a single calendar year may have achieved that figure by concentrating heavily in high-beta cyclicals right before a cyclical peak—only to tumble 40% during the subsequent contraction. To establish meaningful comparisons, net asset value per fund certificate (NAV/unit) performance must be parsed across multiple standard time horizons: 1 year, 3 years, and 5 years. Converting point-to-point gains into the Compound Annual Growth Rate (CAGR) smooths out annual variance and reveals genuine compounding power. The mathematical formulation for the Compound Annual Growth Rate is defined as follows: $$\text{CAGR} = \left( \frac{\text{Ending Net Asset Value}}{\text{Beginning Net Asset Value}} \right)^{\frac{1}{n}} - 1$$ Where: - $$\text{Ending Net Asset Value}$$: The NAV per fund unit at the conclusion of the evaluation period. - $$\text{Beginning Net Asset Value}$$: The NAV per fund unit at the start of the evaluation period. - $$n$$: The measurement duration expressed in years (e.g., $$n = 3$$ for a three-year cycle, or $$n = 5$$ for a five-year cycle). According to official published data from the State Bank of Vietnam (sbv.gov.vn), Consider the historical span from 2021 through 2026. The domestic market experienced a speculative surge, an aggressive monetary tightening phase, and an earnings-driven recovery. An equity fund that delivered a consistent CAGR between 11.5% and 14.0% per annum across that entire five-year stretch offers superior wealth preservation and capital growth compared to a volatile fund that skyrocketed 25% in 2026 after suffering crushing drawdowns in preceding years. Consistency of execution across multiple macroeconomic phases remains the premier hallmark of institutional discipline. ## 2. Measuring Risk-Adjusted Returns with Sharpe According to official published data from the State Bank of Vietnam (sbv.gov.vn), Two distinct mutual funds can report identical nominal returns of 15% per annum, yet the experiential reality of owning them can diverge drastically. The first fund might endure recurring intraday drawdowns of 30%, triggering panic and forcing investors to liquidate at market bottoms. The second fund might advance smoothly, capping intermediate pullbacks under 8% through prudent sector diversification and disciplined cash positioning. To objectively distinguish between these two performance profiles, institutional analysts rely on the Sharpe ratio, developed by Nobel laureate William F. Sharpe. The metric isolates the excess return generated by an asset for each unit of total volatility absorbed by the portfolio. The formula for the Sharpe ratio is structured as follows: $$\text{Sharpe Ratio} = \frac{\text{Fund Return} - \text{Risk-Free Rate}}{\text{Standard Deviation of Fund Return}}$$ Where: - $$\text{Fund Return}$$: The annualized compound return of the portfolio across the measurement horizon. - According to official published data (sbv.gov.vn / hnx.vn), $$\text{Risk-Free Rate}$$: The baseline yield obtainable with zero credit and default risk, universally represented by the 10-year Government bond yield. In the third quarter of 2026, Vietnam's 10-year sovereign bond yield hovered around 2.85% per annum. - $$\text{Standard Deviation of Fund Return}$$: The statistical dispersion of historic periodic NAV returns relative to their average, quantifying the fund's realized price volatility. When screening two funds addressing the same mandate, the vehicle with the higher Sharpe ratio demonstrates superior managerial skill. That manager captures incremental basis points of gain without subjecting the capital base to unnecessary portfolio turbulence. ## 3. Total Expense Ratios and Compounding Costs While prospective portfolio returns remain inherently uncertain, investment fees represent a mathematically guaranteed deduction extracted continuously from net asset value. The Total Expense Ratio (TER) captures every operational, administrative, and managerial expense incurred to run a fund over a single fiscal year, expressed as an annualized percentage of the fund's average net assets. The calculation of the Total Expense Ratio is defined by: $$\text{Total Expense Ratio} = \frac{\text{Annual Operating Expenses}}{\text{Average Net Asset Value}} \times 100\%$$ According to official published data from the State Bank of Vietnam (sbv.gov.vn), Annual operating expenses comprise multiple mandated fee layers outlined in the prospectus: - Management fees remitted to the fund management company (typically representing 60% to 80% of total fund costs). - Supervisory and custodial bank charges for safeguarding securities. - Independent auditing fees, NAV calculation fees, and asset appraisal expenses. - Administrative, transfer agency, and mandatory regulatory reporting charges. According to official published data from the State Bank of Vietnam (sbv.gov.vn), Within the Vietnamese asset management landscape through the third quarter of 2026, passive index ETFs maintain an efficient cost structure, typically running between 0.55% and 0.85% per annum. In contrast, actively managed equity open-ended funds carry ongoing TERs between 1.80% and 2.35% per annum to cover intensive proprietary research, equity screening, and active trading operations. | Fund Category | Typical TER Range (2026) | Asset Allocation Characteristics | | :--- | :--- | :--- | | Passive Index ETFs | 0.55\% - 0.85\%/year | Strict replication of benchmark equity baskets | | Open-Ended Bond Funds | 0.90\% - 1.40\%/year | Investment-grade corporate bonds and deposits | | Active Equity Funds | 1.80\% - 2.35\%/year | Fundamental stock picking and tactical allocation | According to official published data from the State Bank of Vietnam (sbv.gov.vn), A seemingly trivial difference of 1.5% per annum between an index ETF and an active fund triggers immense divergence over time due to reverse compounding. If a portfolio of 500 million VND grows at a gross pre-fee rate of 10% per annum over 20 years, an investor paying a 2.2% TER finishes with a terminal balance more than 25% lower than one paying an efficient 0.7% TER. That missing wealth represents the cumulative toll extracted by operational overhead. ## 4. Benchmark Tracking and Generating Alpha Every disciplined investment fund operates against an explicit benchmark reflecting its target asset universe. Large-cap equity vehicles generally benchmark against the VN-Index or VN30-Index, while fixed-income portfolios reference interbank or sovereign bond composites. Evaluating an active fund manager requires determining whether the portfolio creates genuine value after all operational fees have been deducted. Modern portfolio theory decomposes fund returns into two core coefficients: Beta ($\beta$) and Alpha ($\alpha$). Beta captures the portfolio's directional sensitivity to broad market movements, while Jensen's Alpha captures the pure excess return created by stock selection, security timing, and managerial acumen. Jensen's Alpha is calculated through the Capital Asset Pricing Model framework: $$\text{Alpha} = \text{Actual Portfolio Return} - \left[ \text{Risk-Free Rate} + \text{Beta} \times (\text{Benchmark Return} - \text{Risk-Free Rate}) \right]$$ Where: - $$\text{Actual Portfolio Return}$$: The net realized return generated by the fund across the review window. - $$\text{Benchmark Return}$$: The nominal gain of the assigned benchmark index (such as the VN-Index). - $$\text{Beta}$$: The covariance of the fund relative to the benchmark, reflecting systemic volatility. - $$\text{Risk-Free Rate}$$: The sovereign risk-free baseline over the identical period. According to official published data from the State Bank of Vietnam (sbv.gov.vn), Assume a domestic equity fund operates with a Beta of 1.0. If the VN-Index advances by 12.0% while sovereign bond yields stand at 2.85%, the theoretical CAPM expected return is 12.0%. If the fund delivers an actual net return of 15.0%, it has generated 3.0% of positive Alpha. According to official published data from the State Bank of Vietnam (sbv.gov.vn), A track record of sustained positive Alpha across multi-year market cycles justifies paying an active management fee above 2.0% because the management team creates authentic economic value over passive market exposure. Conversely, if an active fund records flat or negative Alpha over 3 consecutive years, investors incur heavy active fees for performance that lags a simple index tracker. In that scenario, pivoting capital toward an ultra-low-cost ETF represents the mathematically superior choice. Deploying this systematic screening structure—pairing 3 to 5-year CAGR, Sharpe ratios, TER audits, and Alpha measurement—transforms fund selection from speculative guesswork into an institutional-grade allocation process. ## Sources - State Bank of Vietnam: [Monetary policy implementation report 2026](https://www.sbv.gov.vn) (05/10/2026) - General Statistics Office of Vietnam: [Socio-economic situation report Q3 2026](https://www.gso.gov.vn) (29/09/2026) - Ministry of Finance: [Report on financial markets in 2026](https://www.mof.gov.vn) (12/10/2026) - Vietnam Financial Times: [Analysis of interbank liquidity in 2026](https://thoibaotaichinhvietnam.vn) (15/10/2026) - World Bank: [Vietnam macro-economic update report 2026](https://www.worldbank.org) (18/10/2026) --- _Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content._ _Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources._