Dean Witter now has a multiclass structure on its funds, offering A, B, C and D shares with various sales charges and fee arrangements on 37 of the firm's proprietary funds.
The firm previously had offered only B shares on these funds. The change took effect July 28. It is unclear whether the firm will expand the classes in all of its funds. Calls to Dean Witter corporate communications were not returned.
In supplemental prospectus material, Dean Witter states that "The different distribution arrangements permit an investor to choose the method of purchasing shares that the investor believes is most beneficial, given the amount of the purchase, [and] the length of time the investor expects to hold the shares. ... "
Mutual fund experts believe the switch to multiclass shares will help the firm leverage its distribution channel in the wake of the Morgan Stanley merger. Dean Witter's new no-load D share with a $5 million minimum, while not relevant to the average retail rep, should provide cross-selling opportunities for Morgan Stanley institutional brokers.
"They're [apparently] trying to max out their synergies," says Dennis Gallant, a consultant with Cerulli Associates in Boston, a fund consulting firm. "The hope is to make yourself attractive to multiple distribution channels."
Retail brokers believe the addition of multiple classes will help them compete. "It's a very good thing," says one Los Angeles-area Dean Witter rep. "Before, all we could offer is a B share. Now when it's appropriate to do other types, it's available."
Most of the new A shares will assess a maximum front-end load of 5.25% for equity funds and 4.25% for fixed-income funds, begin breakpointing at $25,000, and eliminate the load with purchases of $1 million or more. The A shares also will be offered to qualified purchasers at NAV subject to a deferred sales charge of 1% on redemptions made within one year of purchase.
Class B and C shares will have no front-end sales charges but will be subject to a CDSC, and a 12b-1 fee of up to 1%.
In a separate move, Dean Witter has moved to make its funds portable, and is in discussions with several brokerage firms regarding selling agreements (see "Oddlots," August '97 RR).