Who gets 12b-1 fees?

Who gets 12b-1 fees?

salespeople
12b-1 fees are paid to the salespeople who distribute mutual funds and are paid from the fund’s assets.

How are 12b-1 fees calculated?

Mutual fund companies base the 12B-1 fee calculations on the fund’s average annual net assets. To calculate the net assets of a mutual fund, subtract the fund’s current liabilities from the market value of its holdings. A fund’s current liabilities include fund management fees and broker commissions.

What are 12 B 1 fees?

So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services. 12b-1 fees get their name from the SEC rule that authorizes a fund to charge them.

What is a good 12b-1 fee?

A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets. The fee gets its name from a section of the Investment Company Act of 1940.

What are 12 1 fees?

So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services.

Should I worry about mutual fund fees?

A general rule—often quoted by advisors and fund literature—is that investors should try not to pay any more than 1.5% for an equity fund. At the same time, small-cap funds usually have higher trading costs than large-cap funds.

What does the 12b-1 fee on a mutual fund mean?

It is also estimated that around 70% of mutual funds charge 12b-1 fees in at least one share class. The 12b-1 fee is a component of a mutual fund’s total expense ratio.

How did the 12b-1 fee get its name?

The fee gets its name from a section of the Investment Company Act of 1940 . Back in the early days of the mutual fund business, the 12b-1 fee was thought to help investors. It was believed that by marketing a mutual fund, its assets would increase and management could lower expenses because of economies of scale.

How are 12b-1 fees distributed to the participants?

And even for those that do, 12b-1 fees are charged to each participant as a percentage of their assets. Additionally, because each participant can distribute their assets differently among the funds in the lineup, 12b-1 fees can often be distributed unevenly among participants.

Is there a 12b-1 fee for Class A shares?

Class A shares, which usually charge a front-end load but no back-end load, may come with a reduced 12b-1 expense but normally don’t come with the maximum 1% fee. Class B shares, which typically carry no front-end but charge a back-end load that decreases as time passes, often come with a 12b-1 fee.