Intermediaries' Incentives across Share Classes in the Same Fund

We provide supporting evidence that intermediaries' incentives vary across retail share classes in the same fund. We find that when a fund has multiple share classes with different distribution fees, flow is less sensitive to poor performance for share classes with higher distribution fees. These results are more pronounced for funds when intermediaries are more inclined to favor one share class over another-specifically, for funds serving only retail investors, having a large dispersion in distribution fees across share classes, or having a share class that charges the maximum allowed distribution fee. Our results hold for funds with small spread in investors' performance sensitivities and disappear in a placebo test. These findings cannot be explained by differences in share-class load fees or investor clientele.