Y-shares are an institutional share class offered in open-end mutual funds. Targeting institutional investors, the share class often has a high minimum investment, beginning at approximately $25,000. This share class also offers the benefit of waived or limited load charges and lower comparative total annual fees.
Breaking Down Y-Share
Y-shares are an alternative to I-shares which are in the most commonly offered mutual fund share class for institutional investors. Y-shares have features and characteristics that are tailored to institutions.
High minimum investment is one of the most distinguishable characteristics of Y-shares and other institutional shares classes. Minimum investments typically begin at $25,000 and can be as high as $5 million. Sales loads are usually not required for Y-shares, which allows institutional investors to buy and sell shares with no added commission charges. Since Y-shares are not associated with intermediary sales charges, they also usually do not pay any distribution fees or 12b-1 fees from the fund’s expenses. Without 12b-1 fees the total expense ratios are lower overall than other share classes in the fund, which is another benefit for institutional investors.
While Y-shares are typically reserved for institutional investors, they may allow investment from retirement plan investors in some cases. Most mutual funds will have designated retirement share classes with similar benefits to institutional shares. Funds without retirement share classes may allow pooled fund investments in Y-shares from retirement plans that collectively seek investment in the fund. This can provide a significant benefit to retirement shareholders, who would take part in the savings from the share class’s lower fees.
Putnam Investments is one investment manager that offers Y-shares across many of its funds as the primary share class for institutional investors. The Putnam Global Equity Fund provides one example. The Fund offers A-shares, B-shares, C-shares, M-shares, R-shares, R6-shares, T-shares, and Y-shares.
The Putnam Global Equity Fund’s Y-share class charges no front-end or back-end sales commissions. The share class also charges no 12b-1 fees, which helps it to have one of the lowest annual expense ratios in the Fund overall at 0.92%. This compares to total annual fund operating expenses of 1.92% for the B-shares and C-shares. Performance for the Y-shares as of December 31, 2016, was also one of the highest in the Fund at 1.24% for the one year. For the five years, performance for the Y-shares was 9.93%, and for the 10 years, performance was 2.72%.