Franklin Resources to Add Redemption Fees

Franklin Resources Inc., the fifth-biggest U.S. mutual fund company, plans to add 2% early-redemption fees to more than 20 of its funds to discourage “market timers,” according to a regulatory filing.

Effective Sept. 17, Franklin will assess the fee on fund shareholders who redeem or exchange shares within 90 days of purchase, according to a Securities and Exchange Commission filing. The fee, which doesn’t apply to 401(k) plan participants and certain other accounts, will be paid to the fund to help offset costs tied to short-term trading. It is designed to protect long-term shareholders, Franklin said.

Franklin MicroCap Value fund, this year’s second-best performing small-cap value fund with a 34% return through Friday, is among funds that would penalize market timers, the filing said.

Market timers tend to buy and sell fund shares quickly to take advantage of short-term market movements. Redemption fees tend to discourage frequent trading into and out of mutual funds because it costs investors every time they take money out of a fund.

Also among funds slated for the redemption fee are: Franklin Aggressive Growth fund, Franklin Large Cap Growth fund, Franklin Small Cap Growth fund I, Franklin Small Cap Growth fund II, Franklin Large Cap Value fund and Franklin Value fund.