Hennessy eyes nixing 12(b)-1 fees on two funds

Hennessy Advisors Inc is discussing getting rid of the 12(b)-1 fees on its Total Return Fund Ticker:(HDOGX) and Balanced Fund Ticker:(HBFBX). Three years ago, the firm lowered the 12(b)-1 fees on these funds from 0.25% to 0.15%. The company is discussing eliminating the charge altogether because management isn't convinced it needs the fees to promote the funds, said Neil Hennessy, chairman and chief investment officer of the firm. “If it doesn't look like we are getting a bang for the buck, we will eliminate the fee,” Mr. Hennessy said. The firm is monitoring inflows into the two funds — which together hold $65 million in assets — to determine whether the fee is effective in bringing in new money, he said. Hennessy's decision to rethink 12(b)-1 fees comes just as the Securities and Exchange Commission is attempting to clamp down on use of the fees for purposes for which they were not intended. Last month, the SEC proposed revamping the 12(b)-1 fee so that firms would be allowed to charge a “marketing and service fee” of up to 0.25%. Anything above that amount would be deemed a continuing sales charge, which would be limited to the highest fee charged by the fund for shares that have no such sales charge. Mr. Hennessy said his firm had been discussing eliminating the 12(b)-1 fees before the commission announced its proposal. “The SEC had nothing to do with our discussions,” he said. The fund firm doesn't have a timetable for its decision. Separately, Hennessy is also looking to acquire equity funds. Last year, the firm acquired two Japan funds from Sparx Investment and Research USA Inc. and renamed them the Hennessy Select SPARX Japan Fund Ticker:(SPXKX) and the Hennessy Select SPARX Japan Smaller Companies Fund Ticker:(SPJSX). The firm is now looking at picking up domestic as well as international equity funds. “There is plenty of cash on the sidelines,” Mr. Hennessy said. “So I think now is a good time to buy equity funds.”