Twentieth Century initiates structured charges for buyers

August 04, 1996|By NEW YORK TIMES NEWS SERVICE

One price for everyone. That's how Twentieth Century has always done business. Investors paid no sales charges when they bought shares, and they paid an annual flat rate to the company for managing their funds -- 1 percent for U.S. stock funds and 0.45 percent to 0.8 percent for bond funds.

The simplicity of Twentieth Century's pricing structure has stood out in an industry where front- and back-end loads, redemption fees and service fees, etc. have made investment decisions more complex than ever.

But Twentieth Century is now joining the pack, with pricing changes that will take effect in October. The company will create four classes of shares: one for investors who buy directly from Twentieth Century, and others for the institutional market, for sales through financial intermediaries such as Charles Schwab & Co. and for sales through financial advisers.

Here is how the fees apply to domestic stock funds: Investors who buy directly will pay the same 1 percent as before, while institutional investors will pay less -- 0.8 percent.

Shares sold through fund supermarkets will still have a maximum 1 percent sales charge, divided into an annual fee of 0.75 percent plus up to 0.25 percent in service fees. The adviser class will have fees of up to 1.25 percent, which includes an annual fee of 0.75 percent plus service and distribution fees of up to 0.5 percent, meaning that the shares can no longer be advertised as no-load.

"We feel that intermediaries provide a service and deserve to be compensated," said David F. Larrabee, vice president for alternate distribution at Twentieth Century.

The new pricing is "a rational and fair response to market conditions," said Don Phillips, president of Morningstar Inc. But he said such pricing complexities "undermine the idea of funds as a simple product."

Pub Date: 8/04/96

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