What Is a Z-Share?

A z-share is referred to the class of mutual fund shares that the fund management company’s employees are permitted to own.

Along with enabling employees to buy them, z-shares can also be used in the benefit plans, provided as compensation or through any of the reward packages.

Understanding Z-Shares

Typically, z-shares are no-load funds, which eventually make them a more attractive option for employees to invest in. Usually, they have no back-end or front-end fees. Moreover, they also have the lowest expense ratios.

Although investors have to pay the same amount of miscellaneous and management expenses as other investors, usually, they don’t have to bear the cost of service or distribution fee since z-shares are sold and purchased directly through the management company; thus, removing the presence of any intermediary.

In certain scenarios, employers might match the number of shares bought in the form of a bonus for their employees. This way, z-shares are kept in the accounts for employees’ benefits. In a way, all of the z-share transactions get managed by the fund company that offers to report on the investments for the employees.

Other features of Z-shares are the same as the other share classes of Mutual Funds. For instance, even z-share assets get pooled for the operational scale of economies and for the management fund. Open-end fund z-shares have to be transacted at the forward price, which is the next reported Net Asset Value.

All in all, mutual fund companies structure the offerings to comprise z-shares as a company-wide incentive. Mutual fund companies get the chance to use z-shares as a valuable instrument in every kind of employee compensation.

They are also broadly used in employee benefit plans. For employees, z-shares can be quite valuable, keeping in mind their long-term employment prospects. At the end of the day, companies use this Asset Class to support employee long-term career development, loyalty and morale.

Franklin Mutual Shares Fund

Franklin Templeton is one of the well-known mutual fund managers that offer z-shares around all of its offerings in the sector of the mutual fund. The Franklin Mutual Shares Fund (MUTHX) offers one such example.

This fund provides A, C, R, R6 and Z shares. Here, z-shares don’t come with any back-end or front-end fees for the employees. Among all of the share classes, the expense ratio is also the lowest.