The Gabelli Funds is about to test the truism that a fund company can not successfully sell a wide range of its funds on both a load and no-load basis.

The Gabelli Funds, which now are sold directly to investors without a load, plans to ask shareholders to approve structural changes which would permit Gabelli to sell its funds through securities salespeople with front-end and contingent-deferred sales charges. The plans may help the funds build assets by targeting niches in both the load and no-load markets, the funds said in filings with the SEC dated March 17.

The funds plan to introduce new shares distributed though brokers before July 1, said Bruce N. Alpert, chief operating officer of Gabelli Funds of Rye, N.Y., in a statement last month. Shareholders are scheduled to vote on the proposed addition of class A, B and C shares at a meeting May 18.

"We want to be firmly established in all areas and channels of distribution, instead of the narrower band of distribution channels we marketed through previously," Alpert said.

Fund companies historically have avoided simultaneously selling the same mutual fund directly to investors and through registered representatives at broker/dealers. The fear has been that intermediaries would not sell such a fund out of concern that investors would learn the fund was available without a sales charge and then buy directly. Some broker/dealers will not permit their representatives to sell a fund which is available without a sales charge directly to investors, industry executives say.

In December, New England Funds announced plans to offer the no-load funds of its affiliates in a load fund, a product mutual fund executives said was unique (MFMN 12/14). Andrew Guillette, an analyst at the mutual fund research firm of Cerulli Associates of Boston, said the Gabelli plan appears even more unusual than that of the New England Funds.

No mutual fund firm has offered a broad line of its own products on both a no-load and load basis, Guillette said. There are no precedents to suggest how broker/dealers would respond to such a situation. Guillette said he expected the practice would not be widely embraced but may be accepted by some distributors.

Gabelli Funds intends to introduce its multi-class offerings with several Gabelli funds which have received four- or five-star Morningstar ratings, Alpert said. The opportunity to sell top performing funds might overcome the reluctance of some broker/dealers, Guillette said.

Gabelli's distribution has evolved in recent years. The fund group historically relied on selling its shares directly to investors. In 1995, however, the Gabelli funds began increasing their presence in mutual fund supermarkets, according to filings Gabelli's parent company, Gabelli Asset Management, made with the SEC last year as part of its initial public offering.

As of Sept. 30, 1998, more than 66 percent of Gabelli's open-end mutual fund assets had come through supermarkets and through other intermediaries such as registered investment advisors, according to the filings.

Arrangements like Gabelli's will become the rule in the mutual fund industry, said Louis Harvey, president of Dalbar, a fund research firm in Boston.

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