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Rating:Prepare to Cross a Lot of Mutual Fund Ts Not Rated 5.0 Email Routing List Email & Route  Print Print
Friday, January 06, 2017

Prepare to Cross a Lot of Mutual Fund Ts

News summary by MFWire's editors

In with the Ts and out with the As.

John Rekenthaler
VP, Research
A giant mutual fund share class shift is coming, argues Morningstar's John Rekenthaler. That share class will look a lot like A shares, except pricing (both out-of-pocket loads and revenue sharing to broker-dealers and platforms) will be uniform for all funds and firms. It will only vary according to platform, with each platform having a set load for all funds and and a set 12b-1 fee for all funds.

Those new shares will be called T shares, and Rekenthaler predicts that they'll replace A shares completely. And even though the controversial DoL fiduciary reg, which inspired such share class pricing harmonization, is in limbo in light of the incoming Trump administration, T shares are coming. (3,800 T shares are in the pipeline, Rekenthaler writes.) Fundsters, say goodbye to paying a higher load or 12b-1 to encourage platforms or FAs to sell your fund.

Fundsters have been whispering for months that the ICI is working on such a share class. And in August LPL bigwigs publicly revealed that they're "pursuing a single share class" that sounds like these T shares in everything but name. Yet some fundsters have said that the big question mark over such new shares is what the SEC thinks, and Rekenthaler offers no updates on what the regulatory agency's take is.

The baseline pricing for T shares, Rekenthaler says, is 250 basis points in upfront load and 25 bps in 12b-1 (compared to A shares loads of upwards of 475 bps), though distributors could tweak that to suit themselves. For example, LPL execs say the new shares would come with a load of between 300 and 350 bps. 

Edited by: Neil Anderson, Managing Editor

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