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A-share and B-share Sales Flip Flop


So far this year, Class A shares of load funds are dominating net sales while Class B shares have decreased significantly from last year, according to a new report from Financial Research Corporation.

Class A shares have accounted for over half (52%) of net flows into load funds in 2001, vs, just 20% last year, according to FRC. In contrast, B-shares have accounted for just 9% of net flows this year, down from 42% in 2000. That trend is likely to continue, the report says.

One of the reasons for the shift is that the types of funds being sold are less likely to be sold as B-shares. Large value funds, the top fund category this year in terms of flows, have nearly the same percentage of B shares as last year's top category (Large Growth), however the top two and three categories this year lack B share products relative to those of 2000.

For example, only 7% of net sales of small- and mid-cap value funds have come through B-shares so far this year, according to FRC. Last year's secondary top-selling funds, mid-cap growth and technology funds, drew in 15% and 23% through B-shares, respectively.

Flows into fixed income funds, which have increased dramatically this year, are less likely to come through B-shares because investors are less likely to tolerate a higher fee on a fund with lower return potential, according to the report. B-shares have made up just 18% of load, fixed-income fund net sales so far this year, according to FRC.

Another reason for the shift is that 401(k) assets are generally sold through A-shares, and that is a distribution channel that is least affected by the market downturn, according to the report. As overall sales decline, 401(k) sales have become a greater portion of total sales.