‘B’ Shares Sent to Detention

11.28.09

- Posted by admin

Mutual-fund firms are giving B shares an F—and kicking them out of school.
More fund companies are dropping B shares, a class of mutual-fund shares that hit investors with a back-end sales charge, known as a “load,” once investors sell. The more-numerous A shares levy a load at the time of purchase.

View Full Image
David Flaherty
The bear market and its aftermath, the woes of asset-backed securities and regulatory problems have put pressure on the B shares’ fees earned by fund houses and the brokers who peddle the B portfolios. “So they are eliminating B shares from their sales platforms,” says Eric Jacobson, director of fixed-income research at fund tracker Morningstar Inc. “When things were growing regularly, the whole scheme was fine. Now it is not.”
Lately, Goldman Sachs Group Inc., Allianz SE’s Pacific Investment Management Co. and American Century announced they would exit B shares. This accelerates a trend that has been gathering force since mid-decade. The fund industry says B shares are shrinking due to lower customer demand. In fact, the number of B shares offered and the class’s sales volume have gone down because the fund companies and brokers no longer want to peddle the Bs.
Over the years, fund houses ranging from Dreyfus to Franklin Templeton have dumped these back-end load funds. The number of B shares offered peaked in 2002 and has slid 20% to 2,283 as of October, says Morningstar. B shares’ assets were 7% of the fund industry’s total in 2000, 4.9% in 2002 and just 1% this year, according to figures from Morningstar and the Investment Company Institute. …

Read the original article at WSJ

Share and Enjoy: