Load Funds Gain Popularity

Sat., April 26, 1997

Tim Quinson Bloomberg News

An increasing number of American mutual fund investors are buying their funds through professional advisers, paying fees for help in choosing among a proliferation of investment alternatives.

The fund industry’s trade group, the Investment Company Institute, said about 54 percent of gross fund sales last year, or $340.7 billion, were purchased through brokers and financial advisers who were paid commissions of as much as 5.75 percent. That’s up from 53.1 percent in 1995 and 50.3 percent in 1994.

In contrast, gross sales of funds sold directly to the public - often without a sales charge - represented 35.5 percent of new fund sales last year, or $224.2 billion, the ICI said. That’s down from 37.4 percent in 1995 and 41.3 percent in 1994.

The remaining fund buying in 1996 was of variable annuities, which the ICI categorizes separately.

“Both the investors and the companies that serve them realize that Americans are squeezed for time and overwhelmed with information,” said Barbara Levin, executive director of the Mutual Fund Forum, a group that educates consumers on how to work with financial advisers.

Putnam Investments, Aim Management Group Inc. and Capital Research & Management are companies that focus on selling their funds through financial intermediaries. All three companies gained market share last year in the $3.7 trillion mutual fund business, according to Strategic Insight, a New York-based industry consulting and research group.

The most popular U.S. fund in 1996, however, was a fund that’s sold directly to investors, Vanguard Group’s Index 500 Portfolio, which attracted net inflows of about $8 billion.

Other top-sellers were Putnam’s New Opportunities, Growth & Income and Voyageur funds, and Aim’s Constellation and Value funds. All five funds are marketed through brokers who charge sales commissions, or “loads.”

Many investors in need of guidance are even buying no-load funds through financial advisers and paying fees.

The change in investor buying habits has caused some companies, including American Century Investments, to rethink the way they make their funds available to investors.

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