Distribution Committee
Understanding the Financial Stress of B Shares in a Bear Market Print E-mail
Written by Robert T. Fleisher, a mutual fund financial consultant and C. Meyrick Payne   

There are more than $300 billion in open-end mutual fund assets with deferred-load share classes. This figure translates into more than $12 billion of commission advances that have been provided by fund distributors in anticipation of recouping this outlay through the collection of 12b-1 fees and contingent deferred sales charges over a period that is typically eight years in duration. Outside credit providers or the distributor's shareholders have either implicitly or explicitly financed this entire amount.

Given the surge in popularity of deferred-load shares (commonly referred to as B-shares) during the second half of the previous decade and the extended downturn in the global equity markets, trustees for mutual funds that issue such share classes need to understand the economics of "B" shares and the subtleties that affect the recovery of commissions advanced.