Source: People's Daily Overseas Edition
What if I want to invest but have no experience? Buying funds is often a good option. However, compared with shareholders, "basic people" have one more trouble: whether they make money or not, the management fee to fund managers cannot be less. When the market is not good, it is inevitable to feel resentful.
Now, things are starting to change. On July 8, the China Securities Regulatory Commission formulated a work plan for the reform of public fund rates, combining regulatory guidance and promotion with industry initiatives, guiding the public fund industry to carry out the reform of the rate mechanism in a sound and orderly manner, and supporting public fund managers and other industry institutions to reasonably reduce fund rates.
Subsequently, large fund companies such as Harvest Fund, China Universal Fund, and GF Fund successively announced the reduction of their public fund product management fees and custody fees and updated product agreements simultaneously. This marks the official launch of the much-watched fee reform of the public fund industry.
What is the background to this rate reform? What do the market parties think? How should ordinary investors choose? On related topics, our reporter conducted an interview.
Rate reduction –
Fund companies issued intensive announcements
Funds raised from public investors in a public manner, also known as "public funds", are one of the important ways for ordinary residents to participate in investment in the securities market. In recent years, China's public fund industry has developed rapidly and has become a very important institutional investor in the capital market, playing an active role in increasing the proportion of direct financing, promoting the reform and development of the capital market, serving the wealth management needs of residents, and serving the real economy and major national strategies.
According to data from the Asset Management Association of China, as of May 2023, there were 10,890 public funds nationwide, with a fund size of 27.77 trillion yuan and 156 fund managers. Among them, 2052 stock funds, 4717 mixed funds and 2115 bond funds accounted for the majority. In addition, there are hundreds of money market funds and QDII (qualified domestic institutional investor) funds.
This round of public funds has reduced management fees and custody fees, and the strength is more obvious.
The flat rate is directly reduced. E Fund Management Co., Ltd. said in the announcement that in order to better meet the investment and financial needs of investors and reduce investors' wealth management costs, the company decided to reduce the management fee and custody fee of some of its funds and revise the relevant terms of the fund contract from July 10, 2023. Relevant documents show that the adjustment involves 90 products such as "E Fangda Long Power Hybrid Securities Investment Fund". The management fee for the relevant active equity funds was generally reduced from 1.5% to 1.2%, and the custodian fee rate from 0.25% to 0.2%.
Floating rates are more flexible. CEIBS Fund Management Co., Ltd. announced that the management fee accrual standard after 3 years after the effective date of the relevant product fund contract will be adjusted to: when the cumulative net value growth rate of fund shares is higher than the performance comparison benchmark for the same period, the management fee of the fund will be calculated at the annual rate of 1.60% of the net asset value of the fund on the previous day; When equal to the performance comparison basis for the same period, the management fee of the fund is charged at an annual rate of 1.20% of the net asset value of the fund on the previous day; Below the benchmark for the performance of the same period, the Fund's management fee is charged at an annual rate of 0.80% of the Fund's Net Asset Value on the previous day. Among them, the applicable annual management fee will be adjusted from 2.00% to 1.60% during the transition period from July 10 (inclusive) to August 20, 2023 (inclusive).
"For a long time, 'the fund makes money, the people do not make money' and 'good hair is not good to do, good to do is not good to develop' have all been pain points in the domestic fund market. Among them, how to set the management fee, how much the standard is set, and how to adjust the float is not only a practical issue that the majority of investors are very concerned about, but also an institutional mechanism related to the sustained and healthy development of the industry. Zeng Gang, director of the Shanghai Finance and Development Laboratory, told this reporter that on the whole, after the reduction of the public fund fee, investors' expenditure on fund management fees and custody fees has been reduced from about 1.75% to about 1.40% per year, saving 0.35%, which is equivalent to one year's demand deposit interest. Assuming that an investor holds a total fund of $100,000, the concession he receives per year after the relevant fee reduction is $350.
Zeng Gang said that the reduction of fund fees means that services supported by investment research capabilities and digital capabilities have become the key areas that public funds need to expand in the future. Among them, companies with high investment level, strong cost control and good compliance risk control are more competitive.
It is understood that in addition to reducing management fees and custody fees, the reform of public fund rates also has a series of measures, including optimizing the transaction commission system of securities companies, improving the collection of fund sales fees, and supporting small and medium-sized fund companies to reduce costs and increase efficiency.
Positive feedback -
The level of performance remains the most important
Management fees have fallen, what do investors think? In the interview, the reporter found that investors generally gave positive feedback, but the level of performance was still the most valued.
Many people believe that the benefits of rate reductions should be seized. "Public funds account for nearly 30% of my investment, and the return is not bad from the past. Now if the management fee is lower, I will consider adding some more funds to purchase those fund products with a strong management team. He Lu, who lives in Zhuzhou, Hunan Province, told this reporter that compared with buying stocks directly, fund products have the advantages of rich variety, moderate risk, time-saving and worry-free. This fee reduction has a strong continuity, conforms to the voice of ordinary investors, and brings tangible benefits to the people. "I think this will not only objectively increase the attractiveness of fund products, but also promote fund managers to improve their competitive awareness and service level."
There are also concerns that lower management fees will affect the motivation of fund managers. Zhang Hongjun, a retired engineer from Heze, Shandong Province, buys some bond or hybrid fund products under a fund every month. In Zhang's view, these fund products can provide higher yields and have low volatility. "I don't really expect to make a fortune from the fund, I just want to be able to use the fund's income to maintain a comfortable and secure life." After the reduction of management fees, the income of fund houses and fund managers will definitely be affected in the short term. My concern is whether they will be less motivated by this. He said he would closely monitor the response of fund companies.
At the same time, more people still expressed the attitude that the performance of the fund itself is more important.
Zhang Cheng, who works in film and television in Zhejiang, clearly stated that "yield" is the focus of his attention. "Although the reduction in management fees is a good thing, I buy funds to hold them for a long time and do not change or redeem them often. What has a greater impact on my investment is the performance return and volatility risk of the fund product itself. Zhang said frankly.
Du Huachen, who has just entered the workplace, has a similar attitude. "The combined 0.35% reduction in management and custody fees is not small. Compared with young people who do not have much savings, people who are older, have enough savings, and have a lot of positions may feel this fee reduction more obviously. Du Huachen said that he is more concerned about whether the redemption cost of the fund can be further reduced and whether the yield can be truly improved, so that novices like himself can "get started" and strive for a higher return on investment.
Zhao Xijun, co-director of the China Capital Market Research Institute of Chinese Minmin University, said in an interview with this reporter that from the perspective of foreign experience, the continuous decline in the level of fund management fees is the result of full competition in the market and is also a long-term trend. "In the mainland, investors have to pay management fees, custody fees, sales fees and other fees to buy funds. According to the scale of existing public funds in the country, the reduction of management fees and custody fees by fund companies is expected to yield more than 12 billion yuan to the public every year. He said.
Encourage competition –
Conducive to the formation of a "virtuous circle"
The CSRC stressed that supervision should always adhere to the people's nature of the development of the public fund industry and continue to promote the high-quality development of the public fund industry.
Zhao Xijun believes that this reform has brought three benefits: first, to a certain extent, it will change the situation of "the people lose money and the managers make steady profits" when the market is not good, so that investors have more sense of gain; Second, further attract long-term funds such as insurance funds, occupational annuities, and enterprise annuities to enter the capital market through funds to strengthen the atmosphere of "rational investment"; Third, fund companies and practitioners are encouraged to effectively improve their own investment levels and achieve fuller competition.
"How to determine the fund rate is a matter that needs to be carefully weighed. If the fixed fee is too high and the fund manager does not lose money, it is difficult to have the motivation to perform well; If you rely entirely on floating rates, it is easy to cause fund managers to 'rush short-term performance' and intensify the speculative atmosphere. Zhao Xijun said that after the reform, which fund has formed a good reputation through actual performance, which one will become larger and larger. By scaling up consistently and effectively, the fund's total revenue will continue to increase, even when the rate is reduced. This means that fund companies need to look for more investment opportunities from new industries, new formats and new business models. From a macro perspective, this is conducive to guiding more funds to invest in emerging areas urgently needed for high-quality development, thus forming a virtuous circle between the capital market and the real economy.
For fund companies, the reform of the rate mechanism in a sound and orderly manner is accompanied by higher requirements for practitioners.
Jing Lei, general manager of Harvest Fund, told this reporter that through the reform and optimization of the relevant rates of public funds, China can further establish and improve the rate system and mechanism that is compatible with the development stage of the existing public fund industry. This will help further promote the healthy development of the industry, make the interests of public funds and investors more coordinated, and promote the industry to achieve "total volume improvement and structural optimization".
"The reduction of public fund fees will give high-quality institutions that attach importance to the interests of investors, have solid investment and research capabilities, and outstanding compliance and risk control levels more competitive." Jing Lei said.
According to Yang Delong, chief economist of Qianhai Open Source Fund, public funds are one of the main ways for Chinese residents to manage their finances. This fee reduction will prompt public funds to pay more attention to improving product scale through high-quality performance, so as to maintain reasonable income and profit levels. Yang Delong told this reporter that Qianhai Open Source Fund has reduced the management fee of more than half of its equity fund products to 1.2%.
The CSRC said that in the next step, in accordance with the work idea of "highlighting key points, combining distance and nearness, steadily and prudently advancing and coordinating development", adhere to the principles of marketization and rule of law, comprehensively optimize the rate model of public funds, steadily reduce the comprehensive rate level of the industry, and gradually establish and improve the rate system and mechanism suitable for the national conditions and market conditions of the mainland and the development stage of the mainland public fund industry, so as to promote the healthy development of the industry and the interests of investors to be more coordinated, mutually supportive and jointly realized. (Reporter Wang Junling)
People's Daily Overseas Edition (Version 11, 2023-07-25)
