Load Fund.

A load fund is a mutual fund that charges investors a sales commission — called a "load" — either when shares are purchased, when they are sold, or on an ongoing basis through annual fees. The load compensates the broker or financial adviser who sells the fund to the client. Unlike the management fee, which is deducted from fund assets and reduces returns invisibly, a front-end load is deducted directly from the investor's initial contribution before any money is invested. A 5% front-end load on a $10,000 investment means only $9,500 actually enters the fund; the remaining $500 goes to the selling intermediary. Back-end loads, sometimes called contingent deferred sales charges (CDSCs), are assessed when shares are redeemed, often on a sliding scale that decreases the longer the investor holds the fund. Level loads, associated with C-share class mutual funds, spread the charge across annual expenses rather than at purchase or sale. The economic case against load funds has grown stronger as low-cost no-load alternatives have proliferated. A load of 5% represents a permanent hurdle: the fund must outperform a no-load alternative by more than that amount just to break even from day one. Research consistently shows that load funds do not, on average, deliver superior returns that justify the upfront cost. Regulatory changes have increased fee transparency, and many brokerages now offer fund supermarkets where investors can access load funds without paying the commission if they meet certain account minimums. Nevertheless, load funds remain prevalent in some adviser-sold distribution channels where the commission structure creates an incentive for advisers to recommend them over cheaper alternatives.