Sunday, December 26, 2010

Share Classes

In terms of mutual funds different share classes represent ownership in the same fund, but with different fee structures. The point of this is to enable shareholder to select an appropriate fee structure. Typically the share classes will be letters, for example: A-shares usually have a loaded fee structure (front or back sales load) and may have a lower management expense ratio, B-shares usually have a back-end load fee structure (paid when the fund is sold), C-shares usually has a constant load structure throughout the fund's life (and may have a higher management expense ratio), Z-shares may be issued as a class of mutual fund shares for employees of the fund's management company to own or receive a part of their compensation package. Investors may end up paying about the same in some way or another under each fee structure, but certain aspects may appeal more to some investors than others e.g. a back end load fee that reduces over time may suit long term investors. As always it is important that investors study the fee structures and do proper due diligence when they make investment decisions.

Synonyms: A-shares, B-shares, C-shares, Z-shares, Fund structure, Units

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