Columbia Overhauls Its R Shares
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Tuesday, October 09, 2012

Columbia Overhauls Its R Shares

Columbia Management is reorganizing the class of shares it offers to retirement plans, which includes making changes to the fee structure and making new shares available to advisors.

For several of its R Shares classes, Columbia is removing the distribution and administration fees, while increasing the fees paid to Columbia Investment Management Services, the transfer agent. In addition, it is renaming the current R3 shares as R4 and the current R4 shares will be renamed Class K shares.

The changes were disclosed in a recent SEC filing, and the story was first broken on our sister publication 401kWire.

Columbia is also changing the share classes available through some of the major clearinghouses, making some types of R Shares available to advisors. Columbia head of distribution, marketing, and products Chris Thompson told the MFWire that this move reflected both increased demand and changes to the business.

"There's a high level of demand, and in keeping with changes in the industry, we've decided to make new shares available through the major clearinghouses," he said.

Thompson told the MFWire that the decision to change its retirement offerings "was in keeping with a demand change that we're seeing from plan sponsors, who want to have greater choice and greater fee transparency."

"There's increasing demand for share classes that have a wider array of fees associated with them," said Thompson. "We're trying to offer a broader array and offer some classes that have fees stripped away. What we're seeing is a demand for share classes that have lower distribution fees associated with them."

The filing, which applies to the 101 funds in the three Columbia fund trusts, discloses the following changes, among others, to the retirement share classes:
  • The 25 basis points distribution fee and 25 bps administrative fees paid by the R4 shares will be eliminated;
  • For most retirement classes, the fees paid to the transfer agent will increase from $21 per year per account plus 5 bps to $21 per account plus 20 bps;
  • Class Y shares will be available only to plans with $10 million and up, or that invest at least $500,000 in the shares, and will not pay transfer agent fees for 12 months;
  • Class R5 shares will be reopened to some RIAs and to omnibus plans; and
  • Class Z shares will be partially closed.

    Some of these changes take place Novermber 1, and some November 8; see the filing itself for the details.

    These changes will affect the pricing of different Columbia funds in different ways, lowering costs for some classes and funds but raising it for others.

    The Columbia Balanced Fund, for instance, currently charges 1.36 percent for its Class R shares. This will be reduced to 1.01 percent in November; but the cost of the current R4 class, soon to be K Shares, will increase from 1.05 to 1.10.

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