12B-1 funds

12B-1 funds

Mutual funds that do not charge an up-front or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12B-1 (passed in 1980).

12B-1 Fund

A mutual fund that charges shareholders a small percentage of the fund's market value, instead of a load (or sales fee). That is, a 12B-1 Plan does not require shareholders to pay a fee when buying or selling shares; rather, they simply deduct what is owed to the shareholder once per year. Usually a 12B-1 plan charges less than 1%.
References in periodicals archive ?
Another study in 1990 concluded that net returns (returns minus the expense ratio and portfolio transactions costs) were lower for 12b-1 funds than non-12b-1 funds.
195) "[I]n 1988, 12b-1 funds actually experienced much slower growth than non-12b-1 funds.
In general, 12b-1 funds have higher expense ratios and lower net investment returns than non-12b-1 funds.