Twentieth Century Mutual Funds will soon tempt banks to sell more of its funds by compensating them through the expense ratios of several new share classes.
The Kansas City, Mo.-based mutual fund company is best known for selling directly to consumers. But Twentieth Century announced this week that it will introduce four share classes this fall for 19 of its 65 funds. The 19 will have varying expense ratios.
The most profitable for banks will be an adviser class that can pay financial intermediaries up to 0.50% of assets a year from a combination of service and distribution fees.
"We recognize there are financial intermediaries," said David Larrabee, vice president for alternate distribution at Twentieth Century, "and we want to pay them for their advice."
In addition, a service class will bear a 25-basis-point distribution charge that could be paid to intermediaries, such as brokerage-run mutual fund supermarkets. A break on other expenses will let holders of the service funds' shares pay the same total of fees as they now do.
A retail class will retain the current fee structures and levels. And an institutional class geared to trust departments and endowments will have a discounted expense ratio but will require multimillion-dollar purchases to qualify.