In an unusual move, broker-sold
will start offering its funds directly to investors -- with no sales charge -- through its new consumer financial Web site,
The move is notable because brokers typically chafe when a fund group starts selling directly to investors, essentially cutting them out of the transaction. But GE might be willing to incur brokers' wrath because not many have sold its funds anyway.
GE Asset Management
, a $115 billion subsidiary of the giant conglomerate, manages about $90 billion on behalf of GE employees. The firm also manages 17 retail mutual funds for nonemployees, but they only have $2.3 billion in assets, according to a spokesman. Nearly all the GE retail funds were started in the 1990s, and many are below $100 million in assets, the point at which the average fund turns a profit.
Like most funds run in an institutional style, they appear to be consistent performers unlikely to turn up on any 10-best or 10-worst lists. Translation: Most brokers already sell consistent, core funds from entrenched industry leaders like
and have little reason to look elsewhere.
Over the past year,
many no-load firms have been going in the opposite direction, taking steps to jump into the broker-sold channel. But GE has made few inroads there. Still, the move online is risky.
"I think this will be very destructive to their broker-dealer distribution. How would you like to be a
broker who just got a commission on a sizable sale, and then have to show your client a prospectus that says they could have gotten the same fund without a load?" asks Burt Greenwald, a Philadelphia-based mutual fund consultant.
He adds that given GE Chief Executive Jack Welch's mantra that the firm won't stay in businesses it can't lead, the firm might be ready to try something new, given brokers' indifference.
"It's a very competitive business, so it makes sense to broaden our distribution model," says Tim Benedict, a GE Asset Management spokesman.
Like many broker-sold fund groups, GE has offered its funds on a load-waived basis to financial planners via the
institutional fund supermarket and others. But selling shares no-load through its new Web site is a bit of a departure. Other broker-sold shops offer their funds online, but they still
charge broker commissions. But if you have a broker and buy GE fund shares online, you won't pay a load, and your broker will only get a trail, or fee, on assets.
When bought through a broker, GE equity funds charge a maximum front-end load or sales charge of 5.75% on A shares; up to 4% on the back-end for B shares; and a back-end load of 1% on C shares. For GE income funds, the loads are 4.25% on A shares; 3% on B shares; and 1% on C shares.
To discourage short-term investors, GE funds have a 1% redemption fee on shares sold within a year of purchase.
BankBoston Funds to Be Merged
funds weren't started until the 1990s, and it looks like they'll be gone altogether in a couple of months.
, the result of last year's
Fleet Financial Group-BankBoston
merger, is asking shareholders of the no-load Boston 1784 funds to approve combining their funds with similar offerings from Fleet's
The merger will happen in May, pending shareholder approval in an April 28 vote, according to proxy materials filed with the
Securities and Exchange Commission
on Feb. 7.
The proxy says the mergers will consolidate research resources, but cost savings aren't highlighted. That's because the filing also notes that a majority of Galaxy funds currently have higher expenses than the funds they are swallowing. A fee waiver will keep shareholders in the merging funds from paying higher fees for at least a year, but there is no guarantee where expenses will head from there.
Boston 1784 funds shareholders will eventually see their shares convert to Galaxy class A shares -- the retail share class with the lowest annual expenses. Boston 1784 shareholders won't pay a load (5.5% on stock funds and 4.75% on bond funds) in the merger and won't be charged a load on additional investments in those funds as long as they haven't closed their accounts.
The merger will combine the firms' tax-free, U.S. Treasury and prime rate money-market funds. Here's a scorecard of the other mergers.
Seven other Boston 1784 funds will be converted into Galaxy funds:
Tax-Exempt Medium-Term Income,
Connecticut Tax-Exempt Income,
Florida Tax-Exempt Income and
Rhode Island Tax-Exempt Income.