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Pimco D Shares to convert to A Shares

Conversion. At a meeting held on November 14, 2017, for each series of PIMCO Funds (the “Trust”) that offers
Class D shares (each, a “Fund”), the Board of Trustees of the Trust approved the automatic conversion of the
Fund’s Class D shares into Class A shares of the same Fund, and concurrent closure of the Fund’s Class D shares.

https://www.sendd.com/yourproof_new1.cfm?uuid=3DBD907F-5056-817E-2004F20592E6960B&[email protected]
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Comments

  • PONDX and PONAX have exactly the same net exp. ratio .90% plus 12-b1 fee .25%. No savings to the customer on this one that I can see.
  • If I understand correctly, they're closing class D. So it's not about savings, it's about making the funds load only, unless you can afford the institutional class. Is that right?
  • edited January 2018
    expatsp said:

    If I understand correctly, they're closing class D. So it's not about savings, it's about making the funds load only, unless you can afford the institutional class. Is that right?

    Yes. The language in Pimco's supplement seems to make that clear. But if you're in a fund's D shares on conversion date, you get converted to the A shares with no load, and can continue on your merry way to buy that same fund without a load in the same account.

    Beyond that, Pimco apparently hasn't allowed LW A shares (they don't at Fidelity, at least), so any new 'small' investors (or old ones wanting to buy a fund they didn't own before) would pay a load. Seems a similar effect to a soft close on the entire Pimco OEF lineup at DIY investor-share level ... unless you like loads.

    Vanguard's $25k I-share minimum for Pimco funds is going to look a lot more attractive come March.
  • ... it's about making the funds load only
    What kind of corporate strategy is that? Who the heck would buy a load fund? Any load fund.
  • The user and all related content has been deleted.
  • Gotta believe agreements with brokerages for LW A shares must be coming.
  • Roy said:

    Gotta believe agreements with brokerages for LW A shares must be coming.

    Sure hope so. If not, it could be a pretty big deal for a lot of us DIYers.
  • Roy said:

    Gotta believe agreements with brokerages for LW A shares must be coming.

    Why would PIMCO go through the trouble
    of converting “D” class shares to “A” class just make “A” class load waived?
    It would have been simpler for them convert A (load) class to D class (non-load) if that was the case...
  • msf
    edited January 2018
    Load fund companies, including PIMCO, have always had a problem offering their funds without a load. If they simply sold A shares noload direct to the public they'd alienate their commission-based broker dealers. So they came up with many different ways of making it seem that they were protecting their sales force.

    Offering multiple share classes was one way to do that. Selling only through brokerages (with added 12b-1 fees) or wrap accounts was another. Back in 2011 Prof. Snowball noted the PIMCO was doing that: "For what it's worth, you need to look for "D" class shares [for noload retail purchases] and you need to have a brokerage (Schwab, Scottrade ...) account. PIMCO does not sell directly to the public.."
    https://mutualfundobserver.com/discuss/discussion/1534/pimco

    Recently, several fund companies have started selling A shares (or F-1 for American Funds) NTF through selected brokerages. PIMCo's just following this trend. At the same time, A shares continue to be sold with front end loads through other channels. Because of that, it's not going to dump A shares. Why not get rid of D shares instead?

    PIMCO recently adjusted its fees on its Income Fund, perhaps in anticipation of this. According to the latest prospectus, D shares had been cheaper than A shares (0.82% vs. 0.88%). At the beginning of October, PIMCO raised the fees on both A and D shares, but raised the D shares more (0.11% vs. 0.06%) to equalize the share costs. Coincidence? You decide.

    In short, by increasing D share fees on funds where they were below A share fees and migrating customers to A shares, PIMCO can easily simply its lineup and reduce its costs while simultaneously increasing the fees it collects. I fully expect the A shares to be available NTF, if not through all discount brokers then at least some strategically selected ones, just as American Funds initially rolled out NTF F-1 shares through just Schwab and Fidelity.
  • edited January 2018
    Or maybe they want to get rid of their small retail investors?
    You know the ones that drive up admin costs by trading mutual funds, or buying NTF D shares without paying a brokerage fee and then turning around and doing a share conversion to I class. These things all drives up admin costs of the funds.
    Pimco doesn’t really need the small time investor. Like you said they have a huge advisor and institutional channel.

    So the small investors can:
    1) put up the money for I class shares
    2) go through an advisor
    3) buy the loaded A shares (for the new investors, not the converted D share investors ).
    4) buy the etf BOND which is a more tax efficient structure than the mutual fund.

    Once the small investors get converted to A shares, if they ever sell completely out they will have to start paying a Load for new A class shares purchases.
    As for the expense increase for A & D shares, it also applied to I class shares and other share classes.
    Pimco is doing this to increase their fee revenue and eliminating expenses (aka the small time investor)

    This is my perspective on it and it will be interesting to see what eventually happens to the A class shares...
  • edited January 2018
    Also, they made D class and A class expenses the same so PIMCO could forcibly push all retail D class shares to A class. (Can’t complain because the expenses are the same). This works for the existing retail accounts that have D shares but any new retail accounts looking for low fund minimums would have to pay for the loaded A share fees.

    Sneaky. Isn’t it???
  • edited January 2018
    but BOND adds no value, particularly, looks like
  • msf
    edited January 2018
    BigTom said:

    So the small investors can:
    1) put up the money for I class shares
    2) go through an advisor
    3) buy the loaded A shares (for the new investors, not the converted D share investors ).
    4) buy the etf BOND which is a more tax efficient structure than the mutual fund.

    5) Pony up $3K to buy the A shares NTF, e.g. PONAX:
    https://investor.vanguard.com/mutual-funds/profile/overview/N061?FundIntExt=EXT

    6) Buy A or I shares NTF with no/low min through an HSA, e.g. The HSA Authority (available funds)

    7) Buy an annuity clone (Pimco Variable Insurance Trust) fund, with no min, e.g. through Fidelity Personal Retirement Annuity
  • edited January 2018
    NSF,
    Interesting that ponAx is *no load* at vanguard!
    PiMco Income isn’t available as an annuity at Fidelity (although total return is available).
    An HSA option is severely limited to how much you can put in per year.
    So even with those additional options, its severely limits the small investor from getting into the fund as it wouldn’t be highly available in the fund supermarket at most brokers.
  • edited January 2018
    I paid a load to buy Oppenheimer’s new fangled commodities fund back in ‘96 or ‘97. It did very well for several years (double digit gains) before crashing and burning. Now it’s long since eliminated from their store of funds. I’m left with some Class A shares there spread out currently among 5 different funds (kind of like a breakfast buffet at a mid-priced hotel chain) - a little bit of everything. I can’t recommend the company or its funds. But I cling to my A shares 20+ years after buying them direct. I’ll say one thing about Oppenheimer: They do have some unique fund offerings in areas many companies don’t care (or dare) to venture into. Just one perspective. FWIW.
  • msf
    edited January 2018
    Interesting that ponAx is *no load* at vanguard!
    Nothing special about load-waived A shares. Already offered by Blackrock (e.g. bAedx), Franklin Templeton (e.g. tcwAx), Nuveen (e.g. npsAx), JPMorgan Chase (e.g. olvAx), Columbia (e.g. rebAx), and on and on. Pimco is well behind the curve.


    PiMco Income isn’t available as an annuity at Fidelity (although total return is available).

    Fidelity's not the only game in town. Look around, you can find it.


    An HSA option is severely limited to how much you can put in per year.
    If you're talking about small investors, they're constrained by what they have to invest. If the HSA contribution significantly limits how much money they can put it, then they're not so small investors (and could afford I shares).


    So even with those additional options, its severely limits the small investor from getting into the fund as it wouldn’t be highly available in the fund supermarket at most brokers.

    What's the issue here? Your list of four options communicated the idea that small investors would either have to become big investors (add lots of money to buy I shares) or pay a load to gain access to Pimco funds. But they can already buy Pimco A shares without a fee or load.

    Now you seem to be agreeing that they can, but that you don't want to walk across the street (metaphorically speaking) to buy the shares. What do you say about the many other funds that aren't open for new accounts everywhere, such as VWENX, ACMVX, BRUFX?

    There's an old joke: A poor, devout man prays each week to win the lottery, and each week doesn't win. He finally asks the Lord why he hasn't won. The response: "meet me half way; buy a ticket!"
  • hank said:

    I paid a load to buy Oppenheimer’s new fangled commodities fund back in ‘96 or ‘97. It did very well for several years (double digit gains) before crashing and burning. Now it’s long since eliminated from their store of funds. I’m left with some Class A shares there spread out currently among 5 different funds (kind of like a breakfast buffet at a mid-priced hotel chain) - a little bit of everything. I can’t recommend the company or its funds. But I cling to my A shares 20+ years after buying them direct. I’ll say one thing about Oppenheimer: They do have some unique fund offerings in areas many companies don’t care (or dare) to venture into. Just one perspective. FWIW.

    I used to suggest that people don't move money out of load families once they've paid the load. It's a sunk cost; you might as well get something out of it (the ability to do exchanges at NAV). But as I noted above, many families, including Oppenheimer, are making (most of) their front end load funds available NTF through supermarkets.

    Unless their unique offerings are not available NTF elsewhere, you might consider transferring your holdings to a brokerage for convenience. Not that you need to, but with the NTF option, a compelling reason to stay put (access to A shares without a new load) has disappeared.
  • edited January 2018
    I already own I class shares of many Pimco funds (PIMIX, PIGIX, PFORX, PSTIX). I was only stating that PiMco is increasing fees and possibly leaving the small investor behind with the elimination / consolidation of the D class shares and the limited availability of load waived A class shares. Having widely available D class shares in a fund supermarket at numerious brokers is beneficial to small investors (its more likely they would be offered at their broker). Small investors may not have the financial ability to open multiple brokerage accounts. You obviously don’t agree...
  • I already have I class shares of many Pimco funds (PIMIX, PIGIX, PFORX, PSTIX). I was only stating that PiMco is increasing fees

    But that was months ago, announced in July, effective Oct. 2. PIMCO hiked the fees on your PIMIX shares at that time also. As an investor in the fund, you must have gotten the notice (prospectus supplement). What is it about this fee hike that makes you feel that PIMCO is going after the little guy?

    To put this in context, PIMCO simultaneously lowered fees on some other funds. Altogether, this has the superficial appearance of minor tweaks to match actual costs; perhaps you have more insight on this.

    possibly leaving the small investor behind with the elimination / consolidation of the D class shares and the limited availability of load waived A class shares.

    What suggests to you that load waived A shares will have limited availability? If that were its objective, PIMCO didn't need to convert the D shares. It could simply have told the brokerages to stop selling D class shares to retail customers. That's what Columbia did with its Z class shares (e.g. ACINX) as did Franklin Templeton (e.g. MDISX). Is there something else that suggests to you that PIMCO won't expand its A share NTF program?

    If anything, the fact that A shares are already NTF at Vanguard is evidence of a willingness by PIMCO to sell the shares load waived, despite the negative effects it may have on its current sales channels (commissioned brokers).

    Having widely available D class shares in a fund supermarket at numerious brokers is beneficial to small investors.
    That's a pretty sweeping statement. Paraphrasing slightly: Having widely available retail class shares sold NTF in a fund supermarket at numerous brokers is beneficial to small investors.

    So of course Vanguard must be out to kill its small investors. First, because it doesn't sell any shares NTF through supermarkets, and second, because it goes so far as to close off access through supermarkets altogether for some funds such as VWELX. How shameful!

    You obviously don’t agree... Yup. I prefer to look at the totality of the situation - managing inflows, keeping costs down by not paying extortion rates of 0.40% to fund supermarkets.
  • At Merrill and Fido the PONDX switchover has taken place (a few days ago) and was seamless, unless from habit you still search for it by that name, and yes, PONAX is ntf and lw at both places. Doubtless everyone knows this already except for us sleepyheads.
  • Not quite seamless at E-Trade, where Monday morning my portfolio had dropped by almost 10k. The D shares were showing a zero value, but the A shares showed up this morning.
  • "switchover has taken place (a few days ago) and was seamless ... for us sleepyheads"

    "Not quite seamless at E-Trade, where Monday ... The D shares were showing a zero value, but the A shares showed up this morning. "


    There you have it. Seamless so long as you don't pay too much attention to the man behind the curtain.


    " PONAX is ntf and lw ..."

    For clarification, this is regardless of whether you had D shares before the conversion. Grandfathering existing shareholders was of no import.

    Except perhaps to promote theories that PIMCO was plotting dissuade new retail investors for some nefarious reason. Or perhaps PIMCO announced grandfathering to drive undecided investors into opening D share positions quickly, before the conversion took place.

    No, I don't subscribe to conspiracy theories. Though I acknowledge that when a fund announces that it will close in two months, that sure look like a last gasp push to gather assets.
  • edited March 2018
    I spoke at length with a Pimco rep in early March about the conversion, mainly because the wording in one of the clauses seemed to be aimed at grandfathering accounts, not funds. The rep confirmed that was the case; in his words, the account in which an investor owned D shares prior to conversion was to be "hard coded" for LW A shares after the conversion ... leaving those who hadn't had at least one fund converted in some account with the A shares available only with loads. There was no plan at that time to make all Pimco A shares LW, at least at Fidelity, which is what I asked about.

    I won't speculate on what brought about the blanket LW deal at Fidelity, but unless the rep was misinformed, it was not part of the original Pimco plan, and it certainly didn't predate the conversion announcement.
  • Many load families, like many noload families, enter into bilateral agreements with individual brokerages to sell a class of funds NTF. For example, LCEAX is available NTF at Fidelity but is sold with a load at TD Ameritrade.. Likewise, the same noload fund may be sold without a fee at one brokerage, but you'll have to pay a fee at another brokerage. For example, HOVLX, NTF at TD Ameritrade, but Fidelity charges a fee.

    The best thing you can hope to see in a prospectus or SAI concerning NTF load waivers is just that the fund is allowed to enter into these agreements with brokerages.

    For example, Blackrock permits front end load waivers for shares sold through "Financial Intermediaries who have entered into an agreement with the Distributor and have been approved by the Distributor to offer Fund shares to self-directed investment brokerage accounts that may or may not charge a transaction fee".
    http://quote.morningstar.com/fund-filing/Prospectus/2017/11/28/t.aspx?t=MDDVX&ft=485BPOS&d=b0560dd20f97785f3e555c63cbc03440 (MDDVX prospectus)

    Similarly, PIMCO allows load waivers in its SAIs: "Each Fund may sell its Class A shares at net asset value without a sales charge to ... client accounts of broker-dealers ... with which the Distributor or PIMCO has an agreement for the use of Class A shares ... in particular situations in which the broker-dealer will make Class A shares available for purchase at NAV."
    http://quote.morningstar.com/fund-filing/SAI/2018/3/23/t.aspx?t=PONAX&ft=497&d=081d50585090e2443fe13f6a9c05c8c4 (PIMCO SAI)

    broker-dealer = financial intermediary
    has an agreement = entered into an agreement
    particular situations = self-directed brokerage accounts

    Sure, nothing required PIMCO to offer A shares load waived at Fidelity or elsewhere. If it hadn't though, it would have been bucking an industry trend by moving from no load to load. That's what the industry was doing 20 years ago (e.g. American Century, Invesco adding loads), not now.

    PIMCO was already selling A shares NTF, so this was simply a question of where, not if, A shares would be available NTF. Terminating NTF arrangements with brokerages would have been the bigger change; keeping the funds available NTF maintained the status quo.

    Was there no plan at PIMCO, or simply no plan that the rep was at liberty to tell you about?
  • edited March 2018
    Yes, no argument with any of what you wrote. My point was that the broad LW agreement between Fidelity and Pimco essentially rendered moot the account by account clause in the conversion notice for Fidelity customers. Of course Pimco and Fidelity were no doubt talking about an agreement well before the conversion ... whether the rep knew about it at the time or not, or just couldn't reveal it.

    Given the terms of the conversion notice and with Pimco A shares at the time not being LW, though, Fidelity customers were right to at least consider adding D shares to accounts in which they wanted A-LW privileges after conversion. In the end, however, with the change to LW across the board, it didn't matter.
  • If A shares are already load-waived at a brokerage (e.g. Schwab), what is the advantage of owning the D shares if both A shares and D shares have the same ER?
  • As of now, there are no more D shares, so you must own A shares - if you had owned D shares, they're now A shares.

    Prior to conversion, a very limited number of brokerages offered A shares load-waived, NTF. Vanguard is the only one I'm aware of, but there are zillions of obscure brokerages out there that could have had their own arrangements.

    Finally, while the A shares and D shares of most of PIMCO funds have had the same ERs for a long time, PIMCO did recently (last October) change some funds' ERs. As I noted several posts above, PIMCO made the cost of PONAX and PONDX the same at that time.
  • AndyJ said:

    Given the terms of the conversion notice and with Pimco A shares at the time not being LW, though, Fidelity customers were right to at least consider adding D shares to accounts in which they wanted A-LW privileges after conversion. In the end, however, with the change to LW across the board, it didn't matter.

    Let me offer the thesis that strangely enough it may have mattered, though not for any reason I've seen mentioned.

    NTF and lw arrangements come and go. Grandfathering tends to be more enduring.

    For example, there was a period of time (around 2000?) when American Century dropped out of NTF programs completely for a few years as I recall. Perhaps even worse, it started adding load classes and (again from vague memory), allowed only existing (grandfathered) investors who had owned shares directly through AC to continue buying the NL class. Somewhat like what Janus has done with its lower cost D shares, which can now be purchased only directly, and only if you have held D shares there forever.

    Because if this, I hung onto a minimal position in an AC fund I had purchased directly. I finally sold off my last shares just a couple of years ago. The nuisance cost to me was greater than the value in protecting against the small chance that AC would go the same route again and there would be an AC fund that I really wanted at that future time.

    It is theoretically possible that at some time in the future, PIMCO likewise would drop its NTF/LW agreements but still protect those grandfathered accounts. Do I expect this? No, not given PIMCO's history. So I didn't open a PIMCO account to protect against this possibility as I had with AC.

    Still, I hold onto a $1K Z-share position in a Mutual Series fund at Franklin Templeton. Even though FT has opened up its A shares to LW purchases, so one doesn't need a back door (grandfathered access) for them any longer.
  • So now we can no longer purchase PIMCO funds on NTF platforms :X
    And brokerages will charge fee when you sell.

    Thanks PIMCO. Not.

    There has to be law against multiple share classes.
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