A shares live on, despite some hefty upfront sales charges

Most of the funds are top performers in their categories over the past five years.
JUL 13, 2017

Remember the days when your clients paid you upfront to buy a mutual fund? Apparently, those days aren't entirely gone. The 15 largest A share classes saw net new cash flow of $8.1 billion over the past 12 months, according to Morningstar Inc. Granted, that's not a lot. The Vanguard S&P 500 ETF (VOO) saw more inflows than that in the past six months. Nevertheless, "It shows there is business being done in A shares," said Russel Kinnel, Morningstar's director of research. Most of the leading sellers are bond funds, such as PIMCO Income A. Other top-sellers are conservative stock funds or balanced funds. "Clearly, there are some old-school brokers out there selling old-school funds," Mr. Kinnel said. Bond fund maximum sales charges in the group range from 2.25% for Lord Abbett Floating Rate A (LFRAX) to 4.50% for Mainstay Tax-Free Bond A (MTBAX). Stock funds and balanced funds on the list have 5.75% maximum loads. Most of the funds are top-performers in their categories during the past five years. PIMCO Income A (PONAX), for example, ranks in the top 7% in its Morningstar category, and American Funds Balanced (ABALX) is in the top 6% of its category. BlackRock Low Duration Bond A (BLDAX) is the exception. It's on the 81st percentile in its category. Sales charges take their toll on investor returns, especially in the short term. MFS Municipal Income, for example, has gained just 0.19% in the past 12 months, including income. The fund's 4.75% maximum sales charge would have cut that to a 4.07% load-adjusted loss. All front-end funds have breakpoints, however, so a savvy adviser could have used several ways to reduce any of these funds' loads — even to zero. PIMCO Income Fund A, for example, has no sales charges on purchases above $1 million, and the sales charge falls to 3.25% for amounts between $100,000 and $250,000. Investors can often hit those breakpoints by aggregating amounts in the fund family, signing a letter of intent to invest a certain amount in the fund, or by aggregating familial holdings.
A shares with the largest one-year net inflows
InvestmentTickerNet flow ($ millions)Total returnLoad-adjust return
PIMCO Income APONAX$1,468.749.29%5.19%
Lord Abbett Floating Rate ALFRAX$1,261.456.56%4.16%
Franklin Federal Tax-Free Income AFKTIX$912.61-1.16%-5.36%
Victory Sycamore Established Value AVETAX$767.9215.94%9.28%
American Funds American Balanced AABALX$429.0410.41%4.07%
BlackRock Low Duration Bond Inv ABLDAX$418.241.55%-0.73%
MainStay Tax-Free Bond AMTBAX$376.97-1.54%-5.97%
American Funds Tax-Exempt Bond AAFTEX$348.56-0.78%-4.50%
ClearBridge Large Cap Growth ASBLGX$325.8018.27%11.47%
American Funds Inflation Linked Bd ABFIAX$324.19-0.23%-2.72%
MFS Municipal Income AMFIAX$323.560.19%-4.07%
Spirit of America Energy ASOAEX$308.114.31%-1.68%
PIMCO Short-Term APSHAX$307.843.09%0.77%
Catalyst/Millburn Hedge Strategy AMBXAX$306.986.52%0.40%
American Funds Balanced Portfolio ABLPAX$264.9011.14%4.75%
S&P 500N/A17.90%N/A
Source: Morningstar
Dividends, gains reinvested through June 30.

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