Certainly, a good step. But the management of Capital Group/American Funds, are, obsessed with "segmentation". A recent visit to their site indicated the following fund classes already extant:
A
B
C
F-1
F-2
529-A
529-B
529-C
529-E
529-F-1
R1
R2
R2-E
R3
R4
R5
R5-E
R6
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'.

"According to the Natixis study, investors currently expect returns of 8.5% on top of inflation."
Geez: What study was that? I missed it. None of my fund houses ever asks me that question. I wouldn't answer them if they did. The way I see it, it's their job to run the fund to the best of their ability according to the mandate given them in the Prospectus. I'll live with the results.
A word on Natixis. They are a French investment company and owner of several global fund groups, including U.S. based Harris Associates which operates the Oakmark Funds. I suspect (but can't confirm) that their study covered investors in many different global markets - some with much faster growing economies and a correspondingly less experienced retail investor class than the U.S.
---
"Pat Dwyer of Merrill Lynch says the firm thinks we are still in the early stages of a secular bull market. Healthcare stocks will do particularly well, he predicts."
This is from the same article, but seems to contradict the author's broader argument.
---
"Investors are optimistic about returns; they have high hopes for what they can achieve,” said David Goodsell, executive director of the Durable Portfolio Construction Research Center at Natixis Global Asset Management."
Hope is not a plan. (I guess this supports what the author is trying to establish.)
---
"This level of expectation is a recipe for disappointment, even if the market winds up with gains. It’s a reason to be dissatisfied with an adviser, even if he or she delivers the 6% return that person thinks is realistic."
Seems to me this type of thinking puts the cart before the horse. I'm inclined to decide first on a prudent allocation to various assets, based on age, time frame, risk tolerance and the purpose for which the money is invested. Once so allocated, I'll take whatever return the market provides. Nobody can predict markets. However, if folks are expecting 5-6% above inflation year after year - I'd say they'd need to be pretty far out on the risk spectrum to achieve that consistently. Not impossible to achieve - but not an easy goal either.

FYI: Investors expect annual gains of 8.5% above inflation, and advisers say that’s far too high.
Regards,
Ted
http://www.marketwatch.com/story/you-are-probably-way-too-optimistic-about-your-investment-returns-2016-10-20/print
Chuck Jaffe's Money Life Show: Guest: David Goodsell: (Scroll & Click On Download)
http://moneylifeshow.com/highlights.asp

Being mostly on auto-pilot, I haven't paid a lot of attention to trends this year. But Yikes. Fixed Income investments and dividend paying stocks do look hot.
My single largest holding, T. Rowe Price's Spectrum Income (RPSIX), has gained over 9% YTD.
Price's (now closed) High Yield Bond (PRHYX) has done even better, up 13% YTD.
Meanwhile, their highly respected (also closed) Capital Appreciation fund (PRWCX) lags both, having gained only 6.83% YTD.
VFINX (I track it to get a sense of how the Index 500 is doing) is ahead a relatively modest 6.64% YTD.
(Thanks to Junkster for getting the thread back on track)

Meanwhile back in the real world several categories of bond funds have double digit gains in 2016. Flight occurs way after the fact and prices have already been in a pronounced downtrend. That is what occurred with the Third Avenue High Yield fund and Sequoia Fund to name just a recent few.

https://www.sec.gov/Archives/edgar/data/1376720/000139834416019748/fp0022085_497.htm
497 1 fp0022085_497.htm
STEWART CAPITAL MID CAP FUND
(a series of Stewart Capital Mutual Funds)
Supplement dated October 19, 2016 to
the Prospectus and Statement of Additional Information dated May 1, 2016
This Supplement provides new and additional information beyond that contained in the Prospectus and SAI and should be read in conjunction with the Prospectus and SAI. This Supplement supersedes any information to the contrary in the Prospectus, SAI, and the Supplement filed September 27, 2016.
The Board of Trustees of Stewart Capital Mutual Funds has concluded that it is in the best interests of Stewart Capital Mid Cap Fund (the “Fund”) and the Fund’s shareholders that the Fund cease operations. The Board has determined to close the Fund and redeem all outstanding shares on or before November 18, 2016 (the “Redemption Date”).
On September 27, 2016, the Fund stopped accepting new investments and stopped pursuing its stated investment objective. The Fund will liquidate its portfolio and will invest in cash equivalents such as money market funds until all shares have been redeemed. Any required distributions of income and capital gains will be distributed as soon as practicable to shareholders and reinvested in additional shares, unless you have previously requested payment in cash. Shares of the Fund are otherwise not available for purchase.
Prior to or on the Redemption Date, you may redeem your shares, including reinvested distributions, in accordance with the “How to Redeem Fund Shares” section in the Prospectus. Unless your investment in the Fund is through a tax-deferred retirement account, a redemption is subject to tax on any taxable gains. Please refer to the “Dividends, Distributions and Taxes” section in the Prospectus for general information. You may wish to consult your tax advisor about your particular situation.
ANY SHAREHOLDERS WHO HAVE NOT REDEEMED THEIR SHARES OF THE FUND PRIOR TO THE REDEMPTION DATE WILL HAVE THEIR SHARES AUTOMATICALLY REDEEMED AS OF THE REDEMPTION DATE AND PROCEEDS WILL BE SENT TO THE ADDRESS OF RECORD. If you have questions or need assistance, please contact your financial advisor directly or the Fund at (877) 420-4440.
This Supplement and the existing Prospectus dated May 1, 2016, provide relevant information for all shareholders and should be retained for future reference. Both the Prospectus and the Statement of Additional Information dated May 1, 2016, have been filed with the Securities and Exchange Commission, are incorporated by reference and can be obtained without charge by visiting www.stewartcap.com or calling the Fund at (877) 420-4440.

"...we asked five leading investors to share their best ideas on where to invest $10,000 right now. (It makes sense for smaller sums, too.) We first quizzed them back in June, when we also asked exchange-traded-fund analyst Eric Balchunas of Bloomberg Intelligence to choose ETFs that came closest to the strategies and themes they highlighted. Some of the experts also run mutual funds that employ their strategies.
Among their summer favorites were out-of-favor emerging markets, and many ETFs tracking those markets have seen double-digit gains. How did our panel of experts do last quarter, exactly? Very well, thank you. Check out the results that follow each new entry below. For comparison, the Standard & Poor’s 500-stock index was up 3.3 percent from June 30 to Sept. 30."
how-to-invest-10k
Experts and Tickers mentioned in Article:
Barry Ritholtz:
-DFCEX - IEMG or EEMV
-VEMAX - VWO
Sarah Ketterer
-CIVIX - TDIV or DXJ
Mark Mobius:
-MCHI, EWZ
Rob Arnott:
-PXH, VGK, BKLN, EMLC, FEM or FNDE
Francis Kinniry:
-Use this $10K to re-balance your losers (re-balance your portfolio).
-Consider replacing high costs funds with low cost etfs to lowering investment fee costs.
-AOR

I was aware of the tax differences, but didn't mention it for a couple of reasons. One was that we weren't talking about tax-adjusted figures. The other was because the situation is more complex than you described in case 2 (where the fund pays the advisor).
When funds skim money to pay for expenses, they first take that money first from interest, nonqualified divs, and possibly short term gains that would otherwise be distributed.
If it has enough ordinary income to cover the advisor payments, then what happens is simply that your ordinary income divs are reduced by the amount of the payments. That's equivalent to a straight deduction against ordinary income. The NAV would not be affected by paying this additional cost.
For example, if there's $5 of interest income/share available and the fund pays your advisor $4, then it distributes $1 of ordinary divs and the NAV drops $5. If it doesn't pay your advisor (case 1) then it distributes $5 of ordinary income to you, the NAV still drops by $5.
If the fund reduces its cap gains distributions (rather than its ordinary income distributions) to pay the advisor, then again the NAV is unaffected but now you'll see your cap gains income (as opposed to ordinary income) reduced by the advisor fees. A less valuable income reduction.
The NAV would be affected in the way you described only if the fund had to use assets that it would not otherwise have distributed. That is, if the portfolio did not generate enough income (via interest, divs, net gains), to cover costs, then the fund would have to use actual share value to pay the advisor.
If the NAV were reduced (or its increase diminished), you would indeed be able to capture the expense as a capital loss (or reduced gain). This is a less valuable loss than the two above - first because its is a capital loss vs. a reduction of ordinary income, and second because you'll only recognize it when you ultimately sell your shares vs. a reduced distribution that is recognized now.
So the tax impact in case (2) is quite variable, in both nominal value (ordinary income vs. cap gains) and present value (available in current tax year or only when shares sold).
You are correct about the 2% AGI floor, so the value depends in part on what other misc. deductions you had (e.g. tax prep fees), and whether you are even itemizing.

@msf, you're partly correct about the 30th percentile. I did adjust all funds based on M*'s load adjusted returns but I rounded a little. The actual ranking is between the 29th and 30th percentile and I just used 30 as a round number.
In your example I certainly agree with your assessment that different returns don't necessarily mean you will do better or worse as an investor but if it's in a taxable account I think the taxes would be different too. In case 2 your entire return is captured as a capital gain or loss so you're going to get complete credit for what you've paid. In case 1 I believe the wrap account fee would be an itemized deduction that has to be bigger than 2% of your AGI to begin with and could be lost entirely if you don't itemize.

@LLJB- In thinking on this a little more I recall that American has a sliding load scale for their A funds based upon the total amount invested with the company (I'm not informed as to any other classes). That "total amount" includes multiple funds held in both retirement and non-retirement accounts by a married couple. Another issue is that American reinvests dividends and gains without any load, whereas some other load funds charge the same load on re-investments (or at least they used to, from personal experience).
That makes it problematical for comparative load-adjusted returns, since the loads themselves would vary all over the map depending upon the situation. Still, a footnote for the worst-case load would be of some help, and I definitely agree that front-load funds should be "on their way out": the competitive market conditions now are nothing like they were 20 or 30 years ago.

Keep Your Bonds, but Reduce the Risks JOURNAL REPORTS: FUNDS & ETFS
Some advisers are wary of using bonds in client portfolios. Here is why you still should own them and how to do it right.
As strong demand has pushed up bond valuations—depressing their already low yields—some investors and financial advisers are saying “enough” and are turning their backs on the sector.
Not so fast, say many bond professionals.
1. When bonds make sense...not just worry about yield. “If you own bonds for diversification, income isn’t something that you should [focus] on,” says Laura Thurow, head of asset manager research at Robert W. Baird & Co.
2. Know where risks may lie....In relation to Treasurys, junk-bond yields are roughly in line with historic averages, so they’re not in bubble territory, says Rob Balkema, who manages multiasset funds at Russell Investments.
3. Spread risk in a portfolio.. it is possible to balance them, says Kathleen Gaffney, who manages Eaton Vance Multisector Income Fund (EVBAX). She suggests dividing your bond portfolio into roughly equal parts, each dedicated to a particular type of risk
4. Diversify your sources ... Aviance Capital Management, in Sarasota, Fla., portfolio manager Jeff Walker likes preferred shares.... Convertibles also gyrate less than stocks, though they do move in sympathy with them, says Katrina Lamb, head of investment strategy at wealth-management firm MV Financial, Bethesda. Md.
5. Bonds at lower valuations
Investors who want to temper the risk of principal loss could put some money into bonds that aren’t trading at high valuations. One with potential for appreciation is the U.S. Treasury inflation-protected securities, or TIPS, sector, says Mr. Worah of Pimco.'
....core U.S. consumer-price inflation already has risen above 2%, and Pimco believes it is likely to stay there for a while.
“The factors that have been keeping inflation down, the commodity price correction and strength in the dollar, have faded,” Mr. Worah says. “TIPS are the cheapest government bond” and are worth owning by themselves, he adds.
http://www.wsj.com/articles/keep-your-bonds-but-reduce-the-risks-1476064923
Goldman Asset Likes Inflation Bonds Amid Best Rally Since 2012
Wes Goodman, Bloomberg
“We like them a lot,” Mike Swell, the co-head of global portfolio management for fixed income in New York, said in an interview on Bloomberg Television Tuesday. “Investors are catching up to what a lot of us in markets already know, that inflation is picking up.”
TIPS have returned 6.9 percent in 2016, heading for their biggest gain since 2012, according to Bank of America Corp. indexes. Nominal Treasuries have returned 4.3 percent this year.
http://www.bloomberg.com/news/articles/2016-10-12/goldman-asset-likes-inflation-bonds-amid-best-rally-since-2012
Goldman Sachs Infl Protected Secs R6 GSRUX
iShares Barclays TIPS Bond Fund (Etf) TIP
https://www.google.com/finance?q=NYSEARCA:TIP&ei=GLL9V6GcAYepmAHR_qf4Cg

FYI: U.S. stocks tumbled on Tuesday, with the S&P 500 and the Nasdaq on track for their worst day in one month, after Alcoa kicked off the earnings season on a dour note.
Regards,
Ted
Bloomberg:
http://www.bloomberg.com/news/articles/2016-10-10/oil-gains-burnish-asian-stock-prospects-while-yen-nurses-decline
Reuters:
http://www.reuters.com/article/us-usa-stocks-idUSKCN12B1CH
MarketWatch:
http://www.marketwatch.com/story/losses-on-tap-for-wall-street-stocks-as-oil-backs-away-from-highs-2016-10-11/print
USA Today:
http://www.usatoday.com/story/money/markets/2016/10/11/stocks-dow-tuesday/91888852/
IBD:
http://www.investors.com/market-trend/stock-market-today/stocks-down-nasdaq-gets-near-50-day-line-medicals-smacked-apple-still-firm/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures: Negative
http://finviz.com/futures.ashx

FYI: (This is a follow-up article)
Capital Group recently made its entire American Funds open-end lineup available commission-free on Fidelity and Schwab's brokerage platforms, providing greater access to one of the industry's flagship firms. Investors who have avoided the lineup may want to reconsider it. Indeed, the firm's competitive advantages run deep, especially in equities. Below is a select overview of the firm and lineup. It elucidates American Funds' key competitive advantages and areas for improvement.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=773741

FYI: Gold has gone gangbusters this year, rising with jitters about everything from a weak global economy to the possibility of a President Trump.
After gold's best first-half of a year since 1980, gold-related funds are piled atop the leaderboard for returns. The average fund that invests in stocks of gold miners has returned more than 70 percent in 2016, for example. Such glittering performance has drawn even more investors, and nearly $21 billion has poured into funds that buy either gold bars or the stocks of mining companies in the year to date through August, according to Morningstar. In 2015 investors pulled $2 billion out of those same funds.
Regards,
Ted
http://www.bigstory.ap.org/article/5f021dd9651a459b9faeae1b26aa89ed/after-huge-gains-even-gold-fund-managers-advise-caution

Fair enough. I for one think their multimanager approach is a valid one, and offers a bit of a sanity check between them in their analysis. Is it perfect? Nope, but I appreciate it and their approach has served me well in the AFs I've owned since the early 00s. Moreso, IMHO with no loads, AFs are more attractive now than they'd be otherwise...clearly this is an effort by Capital to try and get more AUM in a world of indexing and/or low-cost funds elsewhere.

rforno, my comment about multiple counselors buying the same stock was not a concern about winding up with (say) 30% in GE -- my presumption is that their are soft caps on any one security overall. Rather that fundholders are paying 4/9 counselors to make the same decision, when they only need to be paying ONE manager.

Real Estate Weekly Review: REITs See Biggest Weekly Decline In 2 Years
Oct. 7, 2016 6:51 PM ET
Hoya Capital Real Estate
Summary
The REIT Index retreated by 5% this week following 2% decline last week. All sectors were lower. REITs are now up only 3% YTD, down 13% from its recent highs.

With graphics and charts
http://seekingalpha.com/article/4010922-real-estate-weekly-review-reits-see-biggest-weekly-decline-2-years
Article featuring Cohen and Steers ,the company. Bloomberg.com Charles Stein
September 12, 2016
Cohen & Steers Inc., this year’s top-performing money manager, has prospered by satisfying the appetites of investors who crave higher yields.
Assets at the company, which specializes in real estate investment trusts and preferred securities, rose 17 percent to $61.5 billion in the first seven months of the year, driven by market appreciation and more than $4.5 billion in net customer deposits.
The company’s oldest mutual fund, the $6 billion Cohen & Steers Realty Shares, returned more than 12 percent annualized over the past 25 years, compared with 9.2 percent for the S&P 500 Index. The fund, up 12 percent this year, has a dividend yield of 2.5 percent, superior to the payouts on the 10-year Treasury note or the S&P 500. Its performance is similar to the Vanguard REIT Index Fund over the past three and five years.
“Higher-yielding REITs are attractive in a low-yield environment,” said Alec Lucas, a Morningstar analyst who follows the real estate fund.
The attraction extends beyond the U.S. With bond yields depressed throughout the developed world, Cohen & Steers’s president and chief investment officer, Joseph Harvey, told analysts on a July conference call that investors “are scrambling for yield and we believe our strategies will continue to benefit.”
The firm pulled in $840 million during the second quarter from its subadvisory business in Japan through a partnership with Daiwa Asset Management. Most of the money went into U.S. REITs, which are popular in Japan.
The $6.8 billion Cohen & Steers Preferred Securities and Income Fund, which has a dividend yield of 5.3 percent, gathered $1.4 billion in deposits in the first seven months of 2016, data from Morningstar show. Preferred shares, considered a stock-debt hybrid, tend to appeal to income-oriented investors.
http://www.bloomberg.com/news/articles/2016-09-12/year-s-top-money-manager-gets-boost-from-yield-starved-investors

@MFO: For many years Capital Group has had a number of excellent active funds in it's stable, but for the loads they would have had a lot more AUM giving Fidelity and Vanguard a run for their money.
Regards,
Ted

American Funds F1 shares can be purchased no-load. Whoa. This is either the beginning of the end for Capital Group or a whole new world.
http://news.morningstar.com/articlenet/article.aspx?id=773461

On the contrary, the fund is exactly what most advisors expect. Those who saw Mr. Hasenstab's unique style and were early to the fund have done well for their investors. Virtually every manager will have a period of 2-3 year span of underperformance. Just as the hot money flowed into TGBAX after it's returns were great, 2005-2010, the same performance-chasing money is now moving out. Nothing has changed from a strategy or philosophy standpoint, but the bets the last couple of years have not paid out. They may do so yet. Contrary to M* comments, advisors and investors who actually take the time to know this fund have never expected it to be tame and run for capital preservation. It is a different vehicle that happens to own bonds, like it or not. It has been a big diversifier for portfolios over its long history with Hasenstab at the helm. We captured some long-term gains late last year and early this year, moving dollars to VTABX, thereby splitting international bonds into two very different pots.

FYI: RiverNorth Capital Management announced the launch of its closed end RiverNorth/DoubleLine Strategic Opportunity Fund (OPP) Wednesday, for which it serves as advisor and DoubleLine Capital serves as sub-advisor.
The fund started trading on the NYSE on September 28. RiverNorth said that the fund will opportunistically invest in fixed income securities and tactically invests in closed-end funds.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2016/10/05/rivernorth-doubleline-launch-closed-end-fund/tab/print/