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MFS Adds Funds With ‘Clean Shares’

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MFS is expanding the number of its U.S. mutual funds that will distributed as so-called “clean shares,” which don’t charge sales loads, 12b-1 fees or sub-accounting fees.

Twenty more of its funds will issue clean shares over the next nine months, beginning with the MFS High Income Fund on June 2. By March 2, 2018, 79 of the firm’s 85 funds — all actively managed — will distribute clean shares.

For MFS, this share class is known as Class R6, which usually indicates retirement fund shares but in this case goes beyond that definition to include advisor-managed accounts as well.

“Class R6 shares offer plan advisors and plan sponsors greater flexibility when constructing defined contribution plans and investment menu options for participants,” said Ryan Mullen, senior managing director for defined contribution and RIA sales at MFS, in a statement. “In addition, as more advisors turn toward fee-based models, Class R6 shares may be an appropriate option for asset-based advisory platforms as well.”

MFS, based in Boston, has been offering Class R6 shares since 2012, initially for retirement accounts but since December also to advisors, with fee-based plans.

“MFS has seen strong demand from clients for our Class R6 or ‘clean shares,’ initially in the retirement market and later for advisory programs,” said Michael Keenan, senior managing director of National Accounts with MFS, in the statement. “More recently, there has been an increasing interest for clean shares from brokerage platforms as clients formulate potential solutions regarding the Department of Labor’s Fiduciary Standard rule.”

The rule begins to take effect on June 9.

 

                        MFS Funds Adding Class R6 Shares

MFS is among a growing group of fund companies offering mutual fund share classes — usually called “Z shares” — to fee-based advisors that exclude additional fees because those fees could be considered a potential conflict of interest for advisors under the Labor Department’s fiduciary rule.

(Related on ThinkAdvisor: New Share Classes in a DOL Fiduciary World)

Advisors investing clients’ assets in funds charging additional fees would have to document why they were in the best interest of their clients even though they are more expensive than other funds. Investing in a cheaper, different share class of the same fund helps advisors avoid that conflict.

MFS has seen an overall reduction in costs ranging from 4 to 14 basis points among its 59 funds already offering R6 shares. The decline varies due to a number of factors, including the size of the fund, according to a spokesman.

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