12B-1 Fee


12B-1 Fee
An annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered an operational expense and, as such, is included in a fund's expense ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets. The fee gets its name from a section in the Investment Company Act of 1940.

Back in the early days of the mutual fund business, the 12b-1 fee was thought to help investors. It was believed that by marketing a mutual fund, its assets would increase and management could lower expenses because of economies of scale. This has yet to be proved. With mutual fund assets passing the $10 trillion mark and growing steadily, critics of this fee, which today is mainly used to reward intermediaries for selling a fund's shares, are seriously questioning the justification for using it. As a commission paid to salespersons, it is currently believed to do nothing to enhance the performance of a fund.


Investment dictionary. . 2012.

Look at other dictionaries:

  • 12b-1 fee — A type of fee charged to investors in some mutual funds. In theory, the fee is supposed to reimburse the sponsor for sales, distribution, or shareholder liaison expenses. In reality, however, it is another type of administrative or management fee …   Financial and business terms

  • 12B-1 Plan — A no load mutual fund that is allowed to use fund assets to pay for its distribution costs. The 12B 1 plan mutual fund is an alternative to paying the sales fees encountered in loaded funds. By charging an annual percentage based on the …   Investment dictionary

  • 12B-1 fees — The percent of a mutual fund s assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund s prospectus. The SEC has recently proposed that 12B 1 fees in excess of 0.25% be classed as a load. A true no… …   Financial and business terms

  • 12b-1 fees — The percent of a mutual fund s assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund s prospectus. The SEC has recently proposed that 12b 1 fees in excess of 0.25% be classed as a load. A true no… …   Financial and business terms

  • 12B-1 Fund — A type of mutual fund that charges its holders 12B 1 fees instead of up front or back end commissions. 12B 1 funds take a portion of assets held and use them to pay expense fees and distribution costs. These costs are included in the fund s… …   Investment dictionary

  • distribution fee — ➔ fee * * * distribution fee UK US noun [C] ► (US also 12b 1 fee) FINANCE, MARKETING an amount of money that may be used to pay for marketing, advertising, and selling mutual funds: »Distribution fees that are used to pay marketing and… …   Financial and business terms

  • Advisor Fee — The fee that is paid to a financial advisor for recommending a load mutual fund based on the needs and time frame of an investor. Fees differ according to the class of mutual fund shares, and are paid to the advisor for recommending a fund that… …   Investment dictionary

  • Mutual fund — This article is about mutual funds in the United States. For other forms of mutual investment, see Collective investment scheme. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors… …   Wikipedia

  • Mutual fund fees and expenses — are charges that may be incurred by investors who hold mutual funds. Running a mutual fund involves costs, including shareholder transaction costs, investment advisory fees, and marketing and distribution expenses. Funds pass along these costs to …   Wikipedia

  • Expense Ratio — Total Annual Fund Operating Expenses ( Expense Ratio ) the line of the fee table in the prospectus that represents the total of all of a fund s annual fund operating expenses, expressed as a percentage of the fund s average net assets. Looking at …   Wikipedia


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