In part one of this post I opened the lid on the Pandora’s Box of mutual fund share classes (from A-Z, without U), currently floating around the industry; in part two we’ll examine why, beyond sheer confusion, this marketing practice is problematic.
Other than just being able to clearly identify the type of share class you are investing in, there are other issues with all multiple share classes. A lot of penalties have been imposed on firms by the SEC and FINRA for utilizing the wrong share class, either in retirement plans or Wrap accounts. With all the share class options available, is it any wonder they are being utilized improperly, either by design or by accident? Let’s look at some of the issues around using the wrong share class. Read more
What’s The Matter with U: “U” is absent in the current offering of 375 Mutual Fund Share Class names
Personally, I don’t like going to a restaurant where the menu just goes on and on, making me wonder if they can really prepare all those selections equally well! I also have a problem with mutual fund share classes, on a number of levels. Like certain restaurant menus, they are endless.
I recently looked at a common mutual fund industry database and found over 375 share class names. Back in the old days you had A, B and C shares. Today you’ve got share classes named after every letter in the alphabet, except the letter U. The letter R appears to be very popular, like appetizers; you can have an R, R1, R2, R3, R4, R5 or R6 share class. Looking for a main course? The names include some nice descriptive examples such as Ultra, Select, Retail, Prime, Premier, Direct, Classic, VIP and hundreds more. I am left to ponder, is U like monkey brains: something found in movies, but not on real menus? And why do we need all these names in the first place?