Mutual fund series

Mutual funds are categorized into different “series” or “classes” which are designed to provide different benefits for investors and/or different compensation arrangements for the advisors that sell the fund.

Mutual funds are a popular investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition vehicle for Canadian investors that provide them with a great deal of optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition to choose from — there are currently over 5,000 mutual funds available in Canada. These funds investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in different kinds of securities (such as company stocks or bonds) based on their investment objectives.

Mutual funds are often categorized into different “series” or “classes” which are designed to provide different benefits for investors and/or different compensation arrangements for the advisors that sell the fund. As a result, each series or class has different fees or expenses, and therefore sees different performance results.

Mutual fundMutual fund An investment that pools money from many people and invests it in a mix of investments such as stocks and bonds. A professional manager chooses investments that match the fund’s goals for risk and return. You can redeem your fund units at any time.+ read full definition fees

Remember: all series of mutual funds come with costs, such as one-time sales charges and ongoing management fees and expenses. Learn more about mutual fund fees.

Understanding different mutual fund series

Each mutual fund seriesMutual fund series Mutual funds are often categorized into different “series” or “classes” which are designed to provide different benefits for investors and/or different compensation arrangements for the advisors that sell the fund. As a result, each series or class has different fees or expenses, and therefore sees different performance results.+ read full definition or class is typically identified by a letter. However, there is no standard for how companies use letter designations to distinguish between their series or classes. This article includes the common letter associated with a series, but be aware that some companies may choose to use different letters for their funds.

Investors in each series or class may need to meet minimum investment and eligibility requirements. The following generally describes the various types of series or classes offered to investors and the specific purposes for which they are intended.

Retail series (Series A)

Most “retail investors” (individuals investing their own money) buy these series or classes, as there are typically minimal requirements for an investor to meet and investors receive the advice of an advisor. These series or classes are typically available for purchase under one or more sales charge options. Advisors who sell the fund to investors usually receive commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition at the time of sale as well as ongoing trailing commissions for the advice that they provide.

Discount series (Series D)

These series or classes are tailored to do-it-yourself investors who purchase mutual funds through a discount brokerageDiscount brokerage A brokerage firm that charges lower fees to buy and sell investments, as opposed to a full-service brokerage. Does not provide investment advice.+ read full definition. DiscountDiscount When something sells for less than its normal price.+ read full definition brokers that sell these series or classes typically receive a significantly reduced trailing commission since the investor does not receive advice. As a result, a discount series or class generally has a lower management feeManagement fee A charge that you pay for having an investment professional manage an investment fund. The fee pays the managers for their time and skills. It may also cover things like communicating with investors and doing all the paperwork needed to run the fund.+ read full definition than a retail series.

Fee-based series (Series F)

These series or classes are available to investors who have fee-based arrangements with their advisor. An investor in a fee-based series or class typically negotiates the rate of their advisor’s fee with, and pays such fee directly to, the advisor. There are generally no trailing commissions on a fee-based series because the advisor is being compensated based on the rate negotiated with the investor. As a result, this series generally has a lower management fee than a retail series.

Institutional and high net worth series (Series I)

These series or classes have high minimum investment requirements and are typically aimed at institutional investors (such as pensionPension A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.+ read full definition plans) or investors making large investments in the fund. Funds in these series generally have lower management fees than the retail series of the same fund.

Because investors who qualify for this series may not be automatically switched once they’ve reached the minimum investment requirement, it is important for investors and their advisors to be aware of their eligibility.

Special purpose series

Some fund companies have series or classes for special purposes. For example, some series or classes are designed for investors who wish to receive regular income from their investments on a taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition-efficient basis. These series aim to pay cash distributions on a regular basis which might include a return of the investor’s capital.

Talk to your advisor

If you are currently investing in mutual funds but aren’t sure about which series your investment is in, review the mutual fund’s Fund Facts document and speak with your advisor. The Fund FactsFund Facts A user-friendly guide that provides key information about a mutual fund including fees and performance. Mutual fund companies are required to give investors a copy of Fund Facts before they decide to purchase a fund.+ read full definition not only tells you which series your investment belongs to, but also provides important information about the performance, risks and costs associated with your specific series.

Key point

All series come with costs such as one-time sales charges and ongoing management fees and expenses. Learn more about mutual fund fees.

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