FYI: (This is a follow-up article)
In the latest example of the impact of the Department of Labor's fiduciary rule, American Funds has filed with the Securities and Exchange Commission to create a stripped-down mutual fund share class.
The new F3 shares will be free of commission, 12b-1 fees, as well as the sub transfer agency fees that typically go to brokerage platforms.
Regards,
Ted
http://www.investmentnews.com/article/20161021/FREE/161029969?template=printart
Comments
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Their canned solution to any new development seems to be "a new share class should fix THAT". The infrastructure to develop &market these ever-expanding class structures isn't free.
Similarly, their solution to "better management" seems to require shareholders to pay for a half dozen, or more, managers, when other equally good funds "make do" with one or 2.
Sure seems like Vanguard and Blackrock understand the value of 'simplicity'.
I agree the ever-expanding # of AF share classes is an exercise in excessive extremes.
However, I do appreciate their multi-manager approach, and it's served me well over the years.
I do like their multi-manager sleeve geered investment approach. Heck, if they loose one manager, or even a few, they still have others that can guide and help propel the fund through adversity where a one manager fund can go cold while it seeks out a good replacement manager. And, who knows, the repacement manager (or managers) might not have the tallent of the old and with this invested money has been known to leave funds going through manager transitions. While the multi manager sleeve type approach offers stability, as I see it, not found in the single or dual manager fund.
As it is found much through life ... What works for one doesn't for another. I like their multi manager sleeve type investment approach. As a matter of fact I though so well of its concept I use a sleeve type investment approach within my own portfolio.
Below is my best guess, thoughts and comments.
Not speaking for American Funds but from the perspective of one of their mutual fund investors I am thinking it would be very difficult, if not impossible, for them to move to only a one share class fund firm due to, the no doubt, many revenue sharing agreements they have in place with the many other financial firms they have developed relationships with through the years. Thus the large number of fund share classes necessary to serve this large and broad base of investors that they now serve through many venues.
I am an A fund share holder that paid a one time front load commission (through the years) and, with this, I received nva exchange prividledges among their A share funds without having to pay another sales charge. These sales charges, from my memory, ranged form 3.5% to 5.75% depending on the fund I was buying without applying other discounts. I'm thinking the brokerage wrap accounts that many firms have moved to that have on going fees associated with these type accounts and that I have the better deal. I have seen annual wrap fee schedules of better than 1.5% for some wrap accounts with most being around the 1.0% range and a few back of that.
I have owned some American Funds for better than thiry years with some funds that I now own were owned for years by my parents before being passed to me through gift and inheritance transfers. When you consider the number of years these funds have been owned the sales load spread over the years owned is very small. Now an on going annual account wrap and/or advisor retainer fee paid over these same years would be very, very large.
I'm thinking long term investors need to determine which route will be the best for them while I can undestand some short term investors might find more favor in the wrap fee account who wish to move in and out of their positions and trade a lot. There are some restrictions on how many nav transfers I can make over a given time span. These restrictions are designed to prevent a lot of in and out trading but do allow for repositioning my portfolio from time-to-time.
Also, know American Funds is not the only family of funds that I am invested with as they are mostly a large cap value shop. Some of the other fund families are Alger, Alps, Blackrock, Columbia, Delaware, Dreyfus, Eaton Vance, Federated, Fidelity, First Investors, Franklin, Guggenheim, Invesco, Hotchkis & Wiley, J P Morgan, Loomis Sayles, Lord Abbett, Neuberger & Berman, Principal, Prudential, Sun America, Thornburg, Virtus and perhaps a few others that I missed. All of these fund families allow for nav exchanges within their family of funds so my cost to move around within their family of funds and reposition my portfolio from time-to-time is at no cost to me.
From my thinking there are no ongoing annual wrap account fees and/or advisor sales commissions, for me, as my sales charges have already been paid except for the small 12b-1 fee that applies on some of the funds I own.
Yep, I'm thining I've got the better deal over wrap fee based accounts and fee based advisors who charge annual retainer fees.
Old_Skeet
I'm holding out for them to roll out the F-8-E class shares. You know, the ones that have no load, no 12(b)-1, cost under .10 ER, and give you 5 extra shares each month as a shareholder bonus.
Ohhh! Do they come with frequent flyer points or AMEX rewards? I'm so in.
From Wikipedia-
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