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What are Y Shares?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 September 2016
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Sometimes referred to as institutional shares, Y shares are a specific class of mutual fund shares that often appeal to institutional investors. Y shares are often acquired on both a load and a no-load basis. Often requiring a significant minimum investment on the part of the institutional investor, the Y share is often traded with no front end sales charges applied to the transaction.

Large money managers are often interested in Y shares, since these types of investors often prefer to purchase larger amounts of mutual funds as part of a single transaction. Often, the minimum investment for a group or lot of Y shares will be in excess of $500,000.00 in US Dollars (USD), with lots that are valued at $1,000,000.00 USD becoming increasingly common even for smaller institutional investors. Because of the amount of Y shares involved in the transaction, the savings on back commission charges are often quite significant, which makes Y shares even more attractive to large scale investors.

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Part of the beauty of this large scale purchase of Y shares is that the strategy is a relatively easy way for institutions to make investments that are relatively stable and present an excellent chance to realize a return without incurring a great deal of risk. Just as with all investments, it is always possible for the institution to sell existing Y shares and acquire other bulk lots of the same type of share. This often occurs when market indicators suggest the approach would be in the best interests of the institution.

While Y shares constitute an excellent investment opportunity for corporate investors and other large scale investment cartels, the nature of the Y share approach precludes the inclusion of most individual investors. Many of the benefits derived from the acquisition of Y shares are directly connected to the ability to purchase large amounts of the issue, a situation that is usually beyond the resources controlled by a single investor.

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