Mutual Fund Companies: Why go from No Load to Load?

Ulli Uncategorized 2 Comments

The recent Morningstar story, that American Century is planning to shake up its funds and increase their load fund lineup from 26 to 39, has been bugging me all weekend.

I simply don’t get it. Well known funds like TWEIX, BEQGX and TWCUX, among others, are set to transition from the no load share classes to the load lineup.

The reason given was that they would be primarily targeted towards fee-based advisors and retirement plans. Well, there is silent revolution going on among many advisors trying to find a way to go from commission based to fee-only.

Why?

Primarily, to escape the stigma that commission based advisors are only looking out for themselves and not for their clients. That would mean the use of no load products and ETFs. Of course, this transition may take years and, in the meantime, load funds will continue being sold to those investors who don’t know any better.

Back to American Century. Could it be that their funds lack performance and the company is looking for another way to market them? Maybe, but a quick check of my StatSheet, which features the American Fund family as well, shows that the performance of their funds, at least for the current Buy cycle, is in line with others.

If you have any thoughts as to why in today’s investment climate, with low cost ETFs taking the lunch bags from some mutual funds, a fund company would go the load route, please share them with me.

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Comments 2

  1. Ulli,

    Although you mentioned that ETFs are taking market share from more expensive choices, I think the most prominent sentence in this piece is this: “…load funds will continue being sold to those investors who don’t know any better.”

    As our corporate society moves away from defined benefit plans and as SSA continues to be held up as the reason for all future economic ruin, more and more “investors who don’t know any better” will be entering the market.

    And like predatory lending practices, there will always be new salespeople peddling bad old mutual fund products.

    That’s my opinion…

    G.H.

  2. G.H.

    That’s how I see it too. Being an idealist, I always hope that I can get to the “uninformed” investor first (via my free publications) in order to help him make a better investment decision.

    Sometimes it has worked, and other times it hasn’t.

    Ulli…

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