What Is a Y Class Mutual Fund?

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Many mutual funds offer different classes of shares denoted by alphabetical names: A shares and B shares are the most common for individual investors. The different classes have different sales load and commission structures.

Function

  • Class Y shares of a mutual fund are only offered to institutional investors. Minimum purchase size is $500,000 or greater. A retail investor would be unable to purchase this class of shares.

Features

  • Y shares do not have a front-end or back-end sales load or commission. Also, Y shares are not charged 12b-1 or marketing expense fees.

Effects

  • The reduced fees will allow Y shares to have higher net returns than other share classes. 12b-1 fees for retail mutual funds range from 0.25 percent to more than 1 percent per year, reducing the returns of Class A, B and C shares compared to Y shares.

Considerations

  • Y class shares of a mutual fund will typically be purchased by large institutional investors, such as corporate or government pension plans and private equity funds.

Potential

  • Retail investor can have access to different Y shares funds by purchasing "fund of funds" mutual funds. These are mutual funds that invest in selected other mutual funds. The fund of funds will hold Y shares in the selected funds to hold down the overall expense ratio.

References

  • Photo Credit Image by Flickr.com, courtesy of Duncan Rawlinson
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