Investor shares are mutual fund class of shares that are structured specifically for investment by individual (retail) investors, as opposed to institutional investors. Investor shares are most commonly offered in open-end mutual funds.
Key Takeaways
Investors shares refer to a class of shares that are designed particularly for individual investors.
These shares generally carry higher fees than institutional shares, but carry lower minimums or requirements.
Investor shares are commonly found in open-ended mutual funds.
Investor shares are one share class available for investment by individual investors in open-end mutual funds. Management investment companies structure open-end mutual funds with multiple share classes and fee levels. Investor shares may also be managed individually in a focused investment fund.
Institutional shares, on the other hand, are a class of mutual fundsharesavailable for institutional investors. Institutional mutual fund share classes typically have the lowest expense ratios among all of a mutual fund’s share classes. They usually require aminimum investmentof approximately $200,000 and may require other specifications for investment.
Any share class available for investment by individual investors can be considered an investor share. Open-end mutual funds can offer a wide range of share classes to different types of investors. Share classes can include A-shares, B-shares, C-shares, R-shares for retirement investing, Z-shares for employee investment, institutional shares for institutional investors and more.
Since open-end mutual funds are pooled investment structures, all of the share class investments in the fund are pooled and managed by the portfolio managers. However, management companies structure each share class offering to have its own fees and sales loads.
Fees and Commissions
Investor share classes often have the highest expense ratios. They aretypically structured with sales loads, also known as commission charges, that are paid to intermediary brokers for trades. Management companies partner with intermediaries and distributors to sell investor share classes. These partnerships are usually what drive fees and sales loads higher for investor shares in comparison to other share classes in the fund.
Investor share classes transacted with full-service brokers will usually have front-end or back-end sales loads. The sales loads for all share classes are detailed in the fund’s prospectus. Each sales load is expressed as a percentage of the investment. Sales loads are charged to the investor and are not part of the fund’s expenses.
Investor share class expensesoften include a 12b-1 fee. This fee is paid from the fund to its distribution network. The 12b-1 fee provides compensation to intermediaries and distributors supporting the overall distribution of the fund. Distribution partnerships are most common in investor share classes. Typically other shares of the fund, such as institutional shares, retirement shares, and Z-shares, do not involve sales loads.
Minimum Investments
The minimum investment isanother factor that distinguishes investor shares from institutional shares and other shares in the fund. Minimum investments can vary broadly for funds across different platforms. Most investor share classes willhave a minimum investment of $100, but it can be as high as $10,000. Institutional shares may have minimum investments of $1 million or more.
Share Class Investing
The Guggenheim Large Cap Value Fund provides an example of a fund managed with varying share classes, fees and minimum investments. The Class A and Class C investor shares include sales loads. These shares also charge 12b-1 fees that increase the total expense ratio. The minimum investment for the Class A and Class C shares is $2,500.
For comparison, the institutional shares require a minimum investment of $2 million. The institutional share class does not require sales loads. It also does not pay any 12b-1 expenses.
A share class is a designation applied to a specified type of security such as common stock or mutual fund unit. Companies that have more than one class of common stock usually identify a given class with alphabetic markers, such as "Class A" shares and "Class B" shares; these carry different rights and privileges.
that are designed particularly for individual investors. These shares generally carry higher fees than institutional shares, but carry lower minimums or requirements. Investor shares are commonly found in open-ended mutual funds.
What Are Class A Shares? Class A shares refer to a classification of common stock that was traditionally accompanied by more voting rights than Class B shares. However, there is no legal requirement that companies structure their share classes this way.
Mutual funds often offer several share classes to investors. Each class invests in the same portfolio of securities and has the same investment objectives and policies. However, their fees and expenses differ, which impact their performance. Other parameters, such as initial investment amounts, may differ as well.
Class A shares generally have more voting power and higher priority for dividends, while Class B shares are common shares with no preferential treatment. Class C shares can refer to shares given to employees or alternate share classes available to public investors, with varying restrictions and voting rights.
Individual investors are individuals investing on their own behalf, and are also called retail investors. Institutional investors are large firms that invest money on behalf of others, and the group includes large organizations with professional analysts.
Class A and Class B shares differ in their availability, convertibility, and power as it relates to voting. One isn't necessarily better than the other, it depends on how a company structures each share and what characteristics of the share class matter most to an investor.
Class-B shares typically have a CDSC that disappears in as little as one year from the date of purchase. Class-C shares often start with a higher CDSC that only fully goes away after a period of 5-10 years.
What Are Investor Shares? Investor shares are mutual fund class of shares that are structured specifically for investment by individual (retail) investors, as opposed to institutional investors. Investor shares are most commonly offered in open-end mutual funds.
Because of the different fees and expenses, each class will likely have different performance results. A multi-class structure offers investors the ability to select a fee and expense structure that is most appropriate for their investment goals (including the time that they expect to remain invested in the fund).
Investors generally should consider Class A shares (the initial sales charge alternative) if they expect to hold the investment over the long term. Class C shares (the level sales charge alternative) should generally be considered for shorter-term holding periods.
In addition to their level load fee structure, Class C shares often feature higher expense ratios compared to Class A or Class B shares. This is because Class C shares do not charge upfront or back-end sales charges, so the fees are spread out over time.
Class A, common stock: Each share confers one vote and ordinary access to dividends and assets. Class B, preferred stock: Each share confers one vote, but shareholders receive $2 in dividends for every $1 distributed to Class A shareholders. This class of stock has priority distribution for dividends and assets.
To reduce ongoing costs for long-term investors, Class C shares, including shares acquired by dividends, convert to Class A shares after an investor has owned them for 8 years.
Descriptions of Share Class Types. Shares of the same fund offer different shareholder rights and obligations, such as different fee and load charges. Common share classes are A (front-end load), B (deferred fees), C (no sales charge and a relatively high annual 12b-1 fee).
Class A shares also charge management fees and 12b-1 fees. Management fees are the same for all share classes of any fund. However, 12b-1 fees for Class A shares are generally lower than the 12b-1 fees for Class B and C shares.
It means an average investor cannot invest in them. The company only offers these shares to individuals in the senior management, C-level executives, founders, board of directors, and owners. These cannot be traded in the open market.
Class A shares typically come with one vote for each share. Holders of Class A shares are also entitled to a dividend and rights to a share of capital in the case of the company being wound up.
What is the difference between Paramount's two classes of common stock? Class A common stock is voting stock, and Class B is non-voting stock. What are the CUSIP numbers for Paramount?
Class C shares give stockholders an ownership stake in the company, just like Class A shares, but unlike common shares, they do not confer voting rights on shareholders. As a result, these shares tend to trade at a modest discount to Class A shares.
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