Fund Supermarkets: What They Are and How They Work

Alexandra Twin, an experienced editor and writer with over 15 years of experience, covers financial news for public and private companies.

What Are Fund Supermarkets?

Fund supermarkets are investment firms or brokerages that offer investors a wide array of mutual funds from different fund families through a single investing platform.

Investors benefit by obtaining access to a range of top-performing funds and receiving a consolidated statement of their mutual fund holdings.

Key Takeaways

• Fund supermarkets are mutual fund clearinghouses that offer a variety of mutual funds from different families under one roof.
• Investors are drawn to fund supermarkets because they provide the opportunity to shop for mutual funds in different asset classes, with different types of holdings, both national and international.
• High net worth investors who work with full-service brokers or financial advisors often use fund supermarket platforms.
• Investors who use discount brokers such as Vanguard and E-Trade also have access to fund supermarkets.
• Fund supermarkets are often preferred over investing in a single fund family, which offers more limited options.

Understanding Fund Supermarkets

Fund supermarkets allow investors to shop for mutual funds from a wide range of fund companies. They are attractive to investors who analyze funds from different providers.

Fund Families

Fund supermarkets are an alternative to investing primarily with a single fund family. They provide diversity and analysis across numerous funds, categories, and families. Many investors prefer this approach over setting up a single account with a fund family that only allows investment in that family’s mutual funds.

Additionally, many fund families specialize in only a few investing categories, which may limit an investor’s ability to identify top-performing funds across the entire investment universe.

Full-Service Brokers

High net worth investors often work with fund supermarket platforms through their full-service brokers or financial advisors. Mutual fund companies list their funds with these platforms through distributors. Investment firms offer these fund choices through various types of client accounts and programs.

Investors working with full-service fund supermarket platforms pay sales loads according to the fund’s sales commission schedule, established by the mutual fund company. Sales loads on funds can be front-end, back-end, or level and often range from 1% to 5% depending on the fund’s sales load structure.

Many investment firms offer fund supermarkets through different programs. Mutual fund wrap accounts, for example, offer a variety of mutual funds to choose from and are often accompanied by financial advisory services to help investors build a portfolio of mutual funds from multiple investment managers.

Sales loads on funds can be front-end, back-end, or level and often range from 1% to 5% depending on the fund’s sales load structure.

Discount Brokers

Discount brokers are another type of fund supermarket, offering investors the benefit of multiple funds from different managers at lower costs. Vanguard, Schwab, Merrill Edge, TD Ameritrade, and E-Trade are a few examples. Investors will find a supermarket of fund options on the trading platforms of these discount brokerages.

Discount brokerages allow investors to place their own trades for lower transactional costs. Many also offer lower-cost fund programs and wrap accounts with featured funds and advisory services to support investment portfolio goals.

Discount brokerages allow investors to place their own trades for lower transactional costs. Many also offer lower-cost fund programs and wrap accounts with featured funds and advisory services to support investment portfolio goals.