Cost of earning investment returns

[zulu007]

CFAI text - example 4 - section 3.3 (Real estate investments).
Slightly confused by what do they mean by “cost of earning investment returns is 20 basis points per year” and why it is added to the total return = (1.05)(1.03)(1.0020) - 1.0 = 8.37.
Many thanks in advance.

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[Ramos4rm]

Looks like management fees…and you would compound it to get the total gross return you need to achieve to satisy your net return objective.

 

[zulu007]

Thanks…

 

[olthefish]

It is management fees, yes.