Investor Shares

What Are Investor Shares?

Investor shares are mutual fund class of shares that are structured specifically for investment by individual (retail) investors, instead of institutional investors. Investor shares are most commonly offered in open-end mutual funds.

Understanding Investor Shares

Investor shares are one share class available for investment by individual investors in open-end mutual funds. Management investment companies structure open-end mutual funds with various share classes and fee levels. Investor shares may also be managed individually in an engaged investment fund.

Institutional shares, then again, are a class of mutual fund shares available for institutional investors. Institutional mutual fund share classes typically have the least expense ratios among all of a mutual fund's share classes. They usually require a minimum investment of approximately $200,000 and may require different specifications for investment.

Any share class available for investment by individual investors can be viewed as an investor share. Open-end mutual funds can offer an extensive variety of share classes to various types of investors. Share classes can incorporate A-shares, B-shares, C-shares, R-shares for retirement investing, Z-shares for employee investment, institutional shares for institutional investors and more.

Since open-end mutual funds are pooled investment structures, all of the share class investments in the fund are pooled and managed by the portfolio managers. Notwithstanding, management companies structure each share class offering to have its own fees and sales loads.

Fees and Commissions

Investor share classes frequently have the highest expense ratios. They are typically structured with sales loads, also known as commission charges, that are paid to intermediary brokers for trades. Management companies partner with intermediaries and distributors to sell investor share classes. These partnerships are usually what drive fees and sales loads higher for investor shares in comparison to other share classes in the fund.

Investor share classes transacted with full-service brokers will usually have front-end or back-end sales loads. The sales loads for all share classes are detailed in the fund's prospectus. Each sales load is communicated as a percentage of the investment. Sales loads are charged to the investor and are not part of the fund's expenses.

Investor share class expenses frequently incorporate a 12b-1 fee. This fee is paid from the fund to its distribution network. The 12b-1 fee gives compensation to intermediaries and distributors supporting the overall distribution of the fund. Distribution partnerships are most common in investor share classes. Typically different shares of the fund, for example, institutional shares, retirement shares, and Z-shares, don't include sales loads.

Least Investments

The minimum investment is another factor that recognizes investor shares from institutional shares and different shares in the fund. Least investments can vary broadly for funds across various platforms. Most investor share classes will have a base investment of $100, but it very well may be as high as $10,000. Institutional shares may have least investments of $1 at least million.

The Guggenheim Large Cap Value Fund gives an example of a fund managed with varying share classes, fees and least investments. The Class An and Class C investor shares incorporate sales loads. These shares also charge 12b-1 fees that increase the total expense ratio. The base investment for the Class An and Class C shares is $2,500.

For comparison, the institutional shares require a base investment of $2 million. The institutional share class doesn't need sales loads. It also pays no 12b-1 expenses.

Highlights

Investor shares are commonly found in open-ended mutual funds.
These shares generally carry higher fees than institutional shares, but carry lower essentials or requirements.
Investors shares allude to a class of shares that are planned particularly for individual investors.