80% of Flows in 2005 Went to No-Load Funds

While A shares and B shares took in the lion's share of money during the 1980s and 1990s, today that's changing, Investor's Business Daily reports. In fact, last year, no-load funds took in 80%, or $154 billion, of the total $192 billion invested in long-term funds, data from the Investment Company Institute shows.

Further, B shares saw their fifth straight year of negative flows, losing $65 billion last year, a substantial increase from net outflows of $1 billion in 2001. Morningstar found that among A, B, C and no-load share classes, today, the most prevalent share class available is C shares (available on 4,173 funds), followed by no-loads (3,739 funds), A shares (3,613) and last, but not least, B shares (2,734 funds).

What's driving the growth in no-load fund sales is 401(k)s and fee-based financial advisers, according to industry experts. And, certainly, part of the decline in the availability of B shares is the fact many broker/dealers and fund companies are backing off of them following regulators penalizing them for selling investors B shares when they could have qualified for A shares with breakpoints or discounted loads.

"The broker/dealer firms have been clamping down on their financial advisers," noted Lou Harvey, president of Dalbar. "They're putting down rules that say, 'You cannot put this investor in the B shares,'"

Franklin Templeton stopped selling B shares to new investors in February 2005, and in April 2004, Fidelity Investments lowered the maximum purchase available in B shares to $49,999 from $250,000.