John Hancock Funds, a unit of John Hancock Financial Services Inc, is paying more in commissions to the brokers who sell its funds in a bid to spur sluggish sales.
The Boston-based firm said through Sept. 28 it will allow brokers who sell its funds' Class A shares to keep the full sales commission charged. Normally, Hancock would take a 75-basis-point cut of the 5 percent up-front sales charge on its equity funds.
Hancock and other fund companies have been seeking ways to increase sales, which have slumped this year as the Standard & Poor's 500 Index has dropped by 10 percent.
"These are the dog days of summer in a dog of a year," said Keith Hartstein, head of sales and marketing. He said the promotion is the biggest one of its kind in the firm's history.
John Hancock's equity funds have lost an average 14.7 percent this year, more than the 12.3 percent loss of the average stock fund tracked by Bloomberg. Its bond funds have gained 3.7 percent this year, less than the 4.3 percent return of the average bond fund tracked by Bloomberg. Investors have withdrawn US$524 million from Hancock's stock and bond funds this year though June 30, after pulling out US$394 million last year, according to Boston-based Financial Research Corp.
Hartstein said those numbers don't tell the whole story.
"Eight of our 10 bond funds are in the top half of their peer group year to date; 10 of our 22 equity funds are in the top half of their peer groups," he said.
"Most fund families are having a difficult time stimulating sales," said Geoff Bobroff, a mutual fund industry consultant in East Greenwich, Rhode Island. "But for retirement plan sales, the industry has not had much new flow."
Hancock said brokers who sell its Class B fund shares will receive an extra 50 basis points of commission and those who sell its Class C shares, an extra 25 basis points. Class B shares charge commissions when investors sell their shares, while Hancock's Class C shares charge 1 percent upfront and 1 percent if redeemed during the first year, according to Andrew Arnott, vice president of product management.
"We are offering some added incentive [for brokers] to take a look at John Hancock, and perhaps change from what they are currently selling to adding a John Hancock fund to their recommended list," Hartstein said.
Among Hancock's better performing funds, John Hancock Regional Bank Fund has gained 7.8 percent this year, beating 83 percent of its financial services peers. John Hancock Large Cap Value Fund has lost 0.81 percent, beating 74 percent of its large-cap value peers, according to Bloomberg.
Exempt from the incentive plan are John Hancock's four international funds, where it has seen evidence of short-term trading, and money market funds, whose low profitability offers John Hancock little chance of recouping its costs, Hartstein said.
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