Alliance Capital Management has some good news and some bad news.
The New York-based investment company announced it has streamlined prices and lowered sales charges on some of its mutual funds, effective Nov. 19.
So what's the bad news? The price breaks apply only to a handful of funds, including equity portfolios. But the front-end sales charge is going up on most of Alliance's bond funds.
On the equity funds, front-end loads were lowered from 5.5% to 4.25%.
The Funds Affected
But investors electing to pay up-front fees on bond funds will shell out 1.25 points more on the North American Government, Multi Market Strategy, Mortgage Securities, Mortgage Strategy, U.S. Government, and Corporate Bond funds.
Most notably, up-front sales charges for an investment of $99,999 or less on short-term multimarket funds are also being hiked from 3% to 4.25% - a lot for a short-term fund.
Alliance is adopting the new pricing structure to make its funds "more attractive to investors and the intermediaries who distribute" them, said marketing manager Linda Finnerty. Before making the changes, the company conducted "a very indepth survey," she added.
Goal to |Eliminate Confusion'
By streamlining pricing, Alliance is trying to "eliminate confusion, standardize pricing, and make it easier to understand," Ms. Finnerty said.
Alliance, which sells its funds through about 500 banks, has focused on building sales through the bank channel.
Last year, $3.36 billion worth of Alliance's funds were sold through banks, a dramatic drop from 1991 when bank sales hit $6.69 billion.
William O'Grady, the company's senior vice president and national sales manager wants to beef up bank sales. By 1995, he predicts half of Alliance's sales could be through banks. In 1992, banks accounted for 25% of the company's sales.
Appealing to Bankers
The new price structure, which the company expects to be popular in the banking environment, may help boost Alliance's distribution via banks.
"Banks reps like the higher up-front sales charge," Ms. Finnerty noted. And if investors are averse to paying a front-end load, they can choose C share pricing and just pay an annual fee of 1% of assets, she said.
"This pricing is appealing to bank customers too," Ms. Finnerty said, since "it gives people who are against paying a sales charge an option."
Investors don't need to worry about freedom of choice on multimarket and world income funds, though. Only C share pricing is available on these funds. Before there was no front-end sales fee levied. Buyers now pay 1% of assets annually.
Alliance is also offering B shares on most of its funds. This class of shares tends to sell well to bank customers because it has a back-end sales charge like a certificate of deposit.
Investors pay a contingent deferred sales charge that declines over time. Under the company's new pricing structure, that fee starts at 4% for equity funds and declines over four years.
With B shares, investors also pay an asset-based annual marketing charge, known as a 12b-1 fee, for eight years on equity funds and six years on fixed-income funds. "It's not a free lunch," an executive at a rival fund company said.