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.
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.
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.
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.
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.
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.
- Y - Wikipedia
- U.S. Securities and Exchange Commission. "How to Read a Mutual Fund Prospectus (Part 3 of 3: Management, Shareholder Information, and Statement of Additional Information)." Accessed May 16, 2020.
- U.S. Securities and Exchange Commission. "How to Read a Mutual Fund Prospectus (Part 2 of 3: Fee Table and Performance)." Accessed May 16, 2020.
- U.S. Securities and Exchange Commission. "Mutual Fund Fees and Expenses." Accessed May 16, 2020.
- Internal Revenue Service. "Topic No. 409 Capital Gains and Losses." Accessed May 16, 2020.
- Internal Revenue Service. "Mutual Funds (Costs, Distributions, etc.)" Accessed May 16, 2020.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.