A handful of mutual funds closed to new investors are still charging 12b-1 fees, Standard & Poors found. One hundred and thirty nine funds with a total of 232 share classes are charging an average 62 basis point 12b-1 fee. Equity funds charge the highest fee, 65 basis points. Money market funds charge an average 52 basis points in their 12b-1 fees, and fixed-income funds charge an average 48 basis points, S&P said.
Based on the number of closed funds still charging these fees, S&P revealed that the top five investment firms engaging in this practice are Idex Mutual Funds, Invesco Funds, ING Investments, Dreyfus Corp. and General Electric Investment Corp.
Designed to cover distribution and shareholder service costs, 12b-1s should not be charged on funds closed to new investments. S&P asked a few of the companies charging these fees how they could justify them, said Phil Edwards, managing director of fund research at S&P. "Most consider the 12b-1 a necessary fee to charge since the fund remained open to existing investors. Standard & Poors feels this is an insufficient explanation, especially in an environment dominated by single-digit returns," Edwards said.