This document summarizes a webinar on trends in asset management distribution. It provides information on the presenters and CPE codes. It then summarizes the objectives of the survey conducted by EY, including how changes in demographics may impact asset flows. Key findings from the survey are outlined, including increasing demand for fee transparency and the dominance of fee-based models. It also discusses trends from the perspective of mutual fund complexes, including growth in omnibus accounts and fee-based business. Charts on holdings by share class and the changing mutual funds product set are also included.

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Distribution Trends
Session three in a three-part webinar
series on asset management distribution:
The Changing Distribution and Share Class
Landscape and the Impact on Transfer
Agents and Record keepers
June 10, 2015

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Today’s presenters
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Jennifer McGovern, Director at BlackRock
Peter Tenggren, Managing Director at BNY Mellon Asset Servicing
David Parks, Executive Director at EY,

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For CPE Seekers
First CPE Code: 895
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Survey overview
EY’s industry survey of US mutual fund share classes, conducted during the fourth quarter of 2013,
identified a number of emerging industry trends. In addition, the survey’s objective was to answer the
following questions at the forefront of the industry:
• How are the changes in demographics and the shift in assets from wealth accumulation to
preservation, as well as the next wealth building generation, likely to impact asset flows across
distribution channels?
• What are the new, dominant distribution models? How are the roles of manufacturers and
distributors, as well as financial advisors, evolving?
• What are the long-term share classes that will meet the needs of investors, yet cover the
manufacturing and distribution costs required to meet regulatory, recordkeeping and servicing costs?
• How are firms defining a share class strategy that will enable an effective response to existing or
proposed changes in regulations? What is the impact of the long-term trend towards fee
transparency and unbundling?
• What are the attributes of a successful, long-term share class strategy for US retail mutual funds?

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Summary of key findings
Share class strategies are in a state of flux, with a variety of industry factors influencing both short
and longer-term pricing decisions. EY identified five major trends impacting manufacturers,
distributors, asset owners, and individual investors based on over 30 hours of detailed interviews
with leading firms. The following outlines the trends; some of which are mature with a clear
impact to the industry, while others are still emerging with a more ambiguous impact to the
industry.
• Increasing demand by investors, plan sponsors, regulators, and intermediaries for transparency
of fees and clarity in eligibility and minimums
• Increasing dominance of the fee-based revenue model
• Increasing importance of the DC/DCIO channel
• Increasing role of the intermediary related to how investors pay for services
• Increasing demand by investors, plan sponsors and intermediaries for the lowest cost share
class
• Increased regulatory and board focus related to the impact to investors

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For CPE Seekers
Second CPE Code: 450

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Summary of key findings
• Enterprise stakeholders are dependent upon the technology, information, and operations
infrastructure to deliver the right distribution data (including share class data) to the right
people at the right time in the required format in order to effectively perform their jobs.
• Investment operations needs to be flexible and responsive to introduction of new products
that are identified as being demanded by the market
• The fee price compression that is driving low cost beta (index funds, CTFs, ETFs) has a direct
impact on investment operations and the need to support new reporting needs, data flows,
and integration with intermediaries
• TA operations is a function of the technology and operations infrastructure of the
organization:
– How well your operations is integrated
– Integration with intermediaries
– Integration with third party data providers
– How well controlled your operations staff is in making sure that data is aggregated,
controlled, and approved (with respect to finance, risk, intermediary organization, less
so investment operations)

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Mutual fund complex perspective
Key trends:
• Continued migration to omnibus accounts
• Continued growth of fee-based business
• Demand for zero payment share class
Continued migration to omnibus accounts
• Considerations
• Increased operational complexity
• Increased intermediary oversight by fund complex and boards of directors
• Greater due diligence requirements
• Board reporting on TA fees and service levels; ensuring that shareholders
are receiving services consistent with payments
Many fund boards have requested greater insight into the approval and oversight
processes of advisor distribution partners, and several are increasing the formality of
due-diligence activities. There is also continued focus on compliance with the 12b-1
plan, as well as overall competitiveness of total expense ratio

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Mutual fund complex perspective
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Growth of fee-based business and demand for zero payment share class
• Fee-based platforms are often looking for the lowest cost share class they qualify for,
often without a 12b-1 fee
• Share classes utilized by fee-based platforms typically have the ability to make
sub-TA payments
• Certain large-DC platforms are seeking a zero-payment share class; which enables
them to unbundle recordkeeping fees from other fund expenses
• Many fund complexes have expanded their R6 or equivalent share classes
Considerations
• Prospectuses have clearly defined eligibility and minimums
• Reduce operational complexity where possible
• Minimize exceptions and have process in place for ensuring consistency of exceptions
• Understand differences among intermediaries/channels in how they consume product

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For CPE Seekers
Third CPE Code: 218
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Holdings by Class Of Shares
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Class Company Open Accounts Total Assets
1 Total 9 33,834 $232,429,461,858.15
2 Total 8 2,251 $48,101,564,292.64
3 Total 5 12,219 $67,154,797,863.74
4 Total 4 217 $6,837,331,580.71
5 Total 4 237 $2,038,411,661.53
6 Total 4 10,976 $6,211,863,341.36
7 Total 2 35,538 $3,685,518,236.11
8 Total 1 186 $50,593,566.98
9 Total 1 62 $1,344,117,644.74
A Total 45 2,872,470 $281,883,795,614.30
B Total 15 131,824 $24,111,598,246.87
C Total 29 541,481 $86,263,274,123.39
D Total 8 27,707 $47,633,568,323.53
E Total 2 293 $5,121,576,176.86
FTotal 5 4,724 $3,141,685,866.59
GTotal 2 1 $99,640,467.21
H Total 2 23 $327,093,425.39
I Total 49 789,957 $432,237,532,499.62

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Holdings by Class Of Shares
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Class Company Open Accounts Total Assets
J Total 3 569 $427,702,553.52
K Total 4 6,456 $5,613,474,819.83
L Total 3 23,071 $5,844,759,643.72
M Total 8 14,773 $22,613,641,061.10
N Total 44 278,773 $310,401,062,709.60
O Total 6 108,664 $17,104,191,935.77
P Total 9 15,949 $9,285,764,023.09
Q Total 4 10,046 $21,029,069,612.31
R Total 22 42,716 $18,413,298,045.51
S Total 10 145,520 $54,497,345,050.62
T Total 6 2,388 $5,165,434,803.30
U Total 2 770 $6,939,942,858.07
V Total 3 11,316 $1,624,044,400.33
W Total 4 18,198 $1,887,937,266.17
X Total 4 3,797 $3,356,747,856.00
Y Total 7 129,122 $27,712,898,698.64
Z Total 7 120,547 $43,088,925,885.38
Blank Total 4 15,652 $15,493,964,562.08
Grand Total 345 5,412,327 $1,819,173,630,574.81

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Changing Mutual Funds Product Set
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• Death of Class B and Class C Shares
• Growth of Load-Wave A Shares
• Growth of Institutional Shares
• Less Velocity of Class R Shares
• Growth of Collective and Pool Trusts
• Non Public Funds
• Registered Hedge Funds

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Questions from the audience
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