What Are Fund Supermarkets?
Fund supermarkets are investment firms or brokerages that offer investors a wide array of mutual funds from different fund families through a single investing platform. Investors benefit by obtaining access to an extensive range of top-performing funds, as well as by receiving a consolidated statement of all their mutual fund holdings.
- Fund supermarkets are a sort of mutual fund clearinghouse, in which a brokerage or investment firm offers market participants a variety of mutual funds from different fund families, all under one roof.
- Investors are drawn to fund supermarkets because they offer the opportunity to shop for a slew of mutual funds in different asset classes, with different types of holdings, both national and international.
- High net worth investors who work with full-service brokers or financial advisors often make use of fund supermarket platforms.
- Investors who use discount brokers such as Vanguard and E-Trade also have access to fund supermarkets, with the platforms offering many options.
- Fund supermarkets are often preferable to investing in just a single fund family, which tends to offer more limited options in fewer categories.
Understanding Fund Supermarkets
Fund supermarkets offer investors the opportunity to shop for mutual funds from a wide range of mutual fund companies. They are attractive to investors who enjoy the benefits of analyzing a range of funds from different mutual fund providers.
High net worth investors will often work with fund supermarket platforms through their full-service brokers or financial advisors. Mutual fund companies list their funds with these platforms through distributors who partner to list a mutual fund company’s funds on fund supermarkets throughout the industry. Investment firms can offer these fund choices through various types of client accounts and programs.
Investors working with full-service fund supermarket platforms will be required to pay sales loads according to the fund’s sales commission schedule, which is established by the mutual fund company. Sales loads on funds can be front-end, back-end, or level and often range from 1% to 5% depending on the fund’s sales load structure.
Many investment firms will offer fund supermarkets through a variety of different programs. Mutual fund wrap accounts are one example of a high net worth program offering a variety of different mutual funds to choose from. Wrap accounts are often accompanied by financial advisory services that help investors build a portfolio of mutual funds from multiple investment managers.
Discount brokers are another type of fund supermarket, offering investors the benefit of multiple funds from different managers at lower costs. Vanguard, Schwab, Merrill Edge, TD Ameritrade, and E-Trade are a few examples. Investors will find a supermarket of fund options on the trading platforms of these discount brokerages.
Discount brokerages allow investors to place their own trades for lower transactional costs. Many also offer lower-cost fund programs and wrap accounts with featured funds and advisory services to support investment portfolio goals.
Fund supermarkets are an alternative to investing primarily with a single fund family. Fund supermarkets provide for diversity and analysis across numerous funds, categories, and families. Many investors prefer this approach as opposed to setting up a single account with a fund family that only allows for investment in that fund family’s mutual fund options. Additionally, many fund families only specialize in a few investing categories, which may limit an investor from identifying top-performing funds across the entire investment universe.