Some fund rates have been "broken" or "cut in half" by lowering fees, which "cheese" has been affected-瞭望新时代网-瞭望时代，放眼世界

Some fund rates have been "broken" or "cut in half" by lowering fees, which "cheese" has been affected

2024-06-26

As a major topic in the new era of public funds, fee reduction has received widespread attention in the industry. Recently, a new wave of fund fee reductions has emerged, with some fixed income and currency funds also lowering fees in addition to active equity funds. It is worth noting that compared to July and August last year, this wave of fee reductions has been more effective. Multiple funds have directly lowered their rates below the "halving" line, with some funds experiencing a rate reduction of up to 80%. According to interviews and research conducted by China Securities Journal reporters, behind the significant fee cuts, there are reasons such as scale pressure to attract funds through fee cuts, further benefiting investors to enhance product attractiveness, and seeking to create differentiated competitive advantages that are different from peers. Industry insiders believe that referring to overseas markets, reducing fees is indeed a trend in the development of the fund industry and a behavior that benefits the people. However, this move will also have a certain impact on the performance of fund companies. How to balance the relationship between profit sharing and performance may require fund companies to break away from the inertia of relying on management fee income in the past, and focus more on improving product performance, serving customer needs, and opening up new growth points for performance. In the recent wave of fee reductions, some funds have shown significant efforts, with their fees as low as "20% off". For example, on June 21st, Great Wall Fund announced that starting from June 24th, it will reduce the management fee rate, custody fee rate, C-class fund share sales service fee rate, and A-class fund share subscription fee rate of Great Wall Joy's flexible allocation mix. From the adjustment results, it can be seen that there has been a significant decrease in various rates. Among them, the annual management fee rate, the annual sales service fee rate for C shares, and the annual subscription fee rate for A shares have been directly reduced to below the "halving" line. The annual management fee rate has been adjusted from 1.20% to 0.40%; The annual rate of sales service fee for Class C fund shares has been adjusted from 0.60% to 0.20%; In terms of subscription rates for A-class fund shares, the subscription amount below 1 million yuan has been reduced from 1.5% to 0.4%, and the subscription amount between 1 million yuan and 3 million yuan has been reduced from 1% to 0.2%; The annual rate of fund custody fee has been adjusted from 0.20% to 0.12%. What does this decrease mean? At present, the annual management fee rate for the vast majority of active equity funds in the market is 1.2%, and the annual custody fee rate is 0.25%. The fund directly reduced the annual management fee rate to 0.4% and the custody fee rate to 0.12%. It is worth noting that the 0.4% annual management fee level can almost be considered the lowest among flexible allocation funds. Why did the fees suddenly drop significantly? From the perspective of Changcheng Jiuyi's flexible allocation of mixed funds, as of the end of the first quarter of this year, the fund's stock position was 65.31%, which is a flexible allocation mixed fund with a focus on stock investment. The fund size is 17.128 million yuan, which is lower than the required 50 million yuan liquidation line, and has been below 50 million yuan for several consecutive quarters at the end of the year. From this perspective, the significant reduction in fees may not be due to the consideration of "holding and protecting the market". Industry insiders have analyzed that lower fees are indeed more attractive to customers, which can attract more funds to enter, increase fund size, or be an effective measure to avoid liquidation. It is worth noting that compared to July and August last year, the fund fee reduction was generally 20%, and this time the decrease is even more severe. Including Great Wall Joy's flexible allocation of mixed funds, there seem to be many funds that have recently adopted a "halving" approach to fee reduction, covering a variety of products such as active equity funds, bond funds, ETFs, etc. Just take the fund that announced a fee cut in June as an example, the rate of many products, such as Guoshou Security Stable Lucky Hybrid, Taixin Internet plus Theme Flexible Allocation Hybrid, Xinhua Fengli Bond, Huitianfu Anxin China Bond, and Yinhua China Securities All Index Securities Company ETF, has been cut by 50% or more. The fund has already lowered fees for the second time. For example, it was announced that the annual management fee rate would be adjusted from 1.0% to 0.6% on June 21st, and the ICBC Credit Suisse Dividend Enjoy Flexible Configuration Hybrid had already adjusted its management fee rate from 1.5% to 1.0% as early as May 26th last year. Last July, the management fee rate was reduced from 1.50% to 1.20%, and the annual custody fee rate was reduced from 0.25% to 0.20%. The Fuguo Market Value Quantitative Selection Hybrid also recently announced another fee reduction, with the annual management fee rate adjusted from 1.20% to 0.80% and the annual custody fee rate adjusted from 0.20% to 0.10%. In addition to the equity and bond funds mentioned above, there have also been money market funds among the funds that have recently lowered fees in search of new growth points. Starting from June 19th, Bank of China Securities Cash Manager will lower the management fee rate and custody fee rate. The annual management fee rate will be lowered from 0.30% to 0.20%, and the annual custody fee rate will be lowered from 0.08% to 0.05%; Starting from June 17th, the annual management fee rate for Jin Yuan Shun An Jin Tong Bao currency will be reduced from 0.25% to 0.15%. According to Wind data, as of June 25th, about a hundred funds have announced fee reductions this year, covering various types of products such as active equity funds, bond funds, currency funds, and ETFs. Regarding fee reduction, many fund professionals believe that referring to the development history of overseas industries, fee reduction is indeed the trend of public offerings, and the continuous development and maturity of the fund industry often accompanies rate reductions. The reduction in transaction commission rates in the fund investment process may also provide space for further significant fee reductions. Lowering fees can reduce the investment costs of investor funds, which is an active act of offering benefits to investors. How to balance the relationship between profit sharing and fund company performance? A public fund practitioner with over a decade of experience believes that the reform of public fund rates has a profound impact. In the short term, the pressure brought about by the decline in revenue after lowering various rates is a painful experience that fund companies must go through. But in the medium to long term, "only investors can win, and the fund industry can win.". The implementation of the reform of public fund fee rates is an important manifestation of benefiting investors, which will further promote the alignment of interests between the fund industry and investors. Industry insiders believe that behind the fee reduction, what is more important is to force public offerings to reverse the previous phenomenon of "fund companies making money, investors not making money", and truly create returns for investors. By lowering fees, fund companies can reduce their reliance on management fee income in the past. If we can solidly do well in our performance, fund companies can actually cover the impact of lower rates on income through net asset value growth, which may be good for investors and fund companies. Some public fund executives believe that looking ahead, public fund companies may need to consider seeking new revenue growth points based on customer demand. In addition, public funds have strong competitive advantages in ESG research systems, technology, and data accumulation. In the context of green finance, providing comprehensive services including rating research and solutions to institutional investors may also become a new growth point for performance. (Lai Xin She)

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