Initial Fund Investment Threshold Is Going Higher

An increasing number of U.S. mutual fund groups are raising the amount it costs investors to make an initial investment in a fund.

Companies are doing this because small accounts aren’t paying enough in fees to offset the costs of servicing those accounts, said Burton Greenwald, an industry consultant in Philadelphia.

“Raising the minimum investment requirement is becoming a trend in the business since it’s a no-win proposition to have a lot of small accounts on the books,” Greenwald said.

Denver-based Berger Associates Inc. recently increased the minimum initial investment for four of its five mutual funds, including its flagship Berger 100 Fund, to $2,000 from $500.

The cost of servicing large numbers of small accounts has increased too much to continue the practice of having a $500 minimum investment requirement, said Jerry Lavin, Berger’s president.

There are numerous costs tied to servicing a shareholder account such as providing automatic access to accounts and printing quarterly statements, Lavin said.