A-Share

What is an 'A-Share'

An A-share is a share class offered in a family of multi-class mutual funds. A-shares are a common type of class offered for individual retail investors. They are usually characterized by a front-end sales charge when traded through a full service intermediary.

BREAKING DOWN 'A-Share'

A-shares are one type of mutual fund share class. These shares target individual retail investors. Other retail share classes in a multi-class mutual fund may include Class B or C. Investors will also find advisor shares and institutional shares. (See also: The ABCs of Mutual Fund Classes.)

Mutual fund share class investments are collectively pooled and managed by the fund’s portfolio manager. Each share class invests in the same fund strategy with the same portfolio manager. What differentiates share classes is primarily their fee structures. Share classes allow fund companies to target different types of investors, ranging from individual to advisor and institutional.

The provisions of each retail share class are determined by the mutual fund company. A significant factor for the structuring of share classes is the sales charge schedule developed for distribution of the mutual fund among intermediaries. Mutual fund companies determine a sales commission fee structure for each share class that is presented in the fund’s prospectus. Each share class also has its own operating expense structure. Distribution fees, also known as 12b-1 fees, are part of the operating expense of the fund however they are paid to intermediaries. Distribution fees are often different among share classes and typically are correlated with the sales charge schedule, requiring lower distribution fees on share classes with higher sales charge commissions. Mutual fund companies may report individual net asset values (NAVs) and performance returns for each share class. A share class’ returns will be more broadly affected by sales charges with less effect on returns from distribution expenses.

Fees and Expenses

Class A shares typically have front end sales charges that can range up to approximately 5.75% of an investment when transacted through a full service broker. Share class expense ratios also vary among retail shares which are usually higher than advisor or institutional shares.

Mutual fund companies will detail their sales charge and expense ratios per share class in the fund’s prospectus. Many mutual fund companies also provide share class returns in their marketing materials.

The Principal Equity Income Fund is one example. This fund offers A, C and I shares. The one year return for the A-share class with front-end sales charge fees as of November 30, 2017 was 15.60%. This differs from the return of the C-shares which was 20.46% with a deferred sales charge. The expense ratios of the two shares classes also vary. The A-share class has a total expense ratio of 0.91%. The C-share class has a total expense ratio of 1.65%.

Both the A-shares and the C-shares have a management fee of 0.51%. However, distribution and service fees differ among the two retail share classes. The A share class has a lower distribution fee of 0.25% in comparison to 1.00% for the C share class.