Editor's note:
On April 4, 2024, the State Council issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market", proposing to strengthen the supervision of securities and fund institutions and steadily reduce the comprehensive rate of the public fund industry.
Previously, we have studied that some brokerages and their asset management funds actually charge investors a management fee of up to 0.9%, which has problems such as high fees and low returns. This article will benchmark the regulatory documents and the latest financial report data, and review the case studies of Galaxy Jinhui's products.
According to the 2023 annual report, Galaxy Mercury Cash Profit achieved a yield of 1.1804% in 2023, underperforming the performance benchmark, lower than the average return of 1.91% for money market funds in the same period, ranking 747/774 among public currency funds.
Although the performance is not good, according to the rate rules set by Galaxy Mercury Cash Profit, the product may still charge 0.9% management fee, 0.25% sales service fee, and 0.05% custody fee in 2023, with the three combined rates as high as 1.20%, which is the highest level in the public offering base.
The analysis found that the products currently charged with a 0.9% management fee are mainly transformed from the asset management products of securities firms and their asset management companies. Under the high management fee, the performance of such products has been greatly compressed, and they generally rank low in the public offering base.
The yield in 2023 is 1.18%, and the peer average is 1.91%
Galaxy Mercury Cash Profit was established on August 26, 2022, and the net asset value of the fund reached about 19.986 billion yuan at the end of 2023. It can be seen from the seven-day annualized return curve of the fund that since 2023, the seven-day annualized return of the fund has been significantly lower than the average of the same category, and most of the time it is also lower than the one-year fixed deposit interest rate in the same period.
Underperforming the one-year fixed deposit rate also means that investors are paying less for the fund during the same period than they would have paid for a one-year fixed deposit with a bank.
The data shows that the fund will achieve a return of 1.1804% in 2023, which is lower than the average return of 1.91% for money market funds in the same period. The fund has returned about 1.94% since its inception (as of April 16th), ranking 724/750 in its peer group.
The comprehensive rate is as high as 1.2%, or more than 160 million yuan of management fees are charged to investors
Even if the performance ranks low and significantly underperforms the average of the same category, Galaxy Mercury Cash Profit can still charge a management fee of about 3 times the market average.
The management fee of Galaxy Mercury Cash Bonus is calculated at the annual rate of 0.90% of the net asset value of the pooled plan × the previous day, accrued on a daily basis until the end of each month, and paid on a monthly basis. It is calculated as follows: the daily accrued collective plan management fee = 0.90% of the net asset value of the collective plan × the previous day ÷ the number of days in the current year.
At present, the management fee rate of the public offering base is mainly concentrated in 0.15-0.33%, and the median is 0.25%, and the 0.9% management fee of Galaxy Mercury cash profit ranks the highest in the industry. In 2023, Galaxy Mercury Cash Profit has received more than $239 million in management fees, which is more than $160 million more than the market average (calculated on a median basis).
In addition to the management fee, the rate structure of Galaxy Mercury Cash Profit also includes a custody fee of 0.05%, a sales service fee of 0.25%, and the annualized total rate of the product is about 1.2%, and the total amount of the three fees will exceed 300 million yuan in 2023.
High management fees dragged down product performance
At present, there are more than 20 money market funds with a maximum management fee of 0.9%, all of which are products of securities firms and their asset management companies. Affected by the new regulations on asset management, when the large-scale collective asset management plan is transformed into a public offering, while canceling the performance remuneration, it still actually charges management fees much higher than those of the same kind.
Under the high management fee, the performance of the above-mentioned products has been greatly compressed, and they generally rank low in the public offering base. Taking stock of the 2023 annual report, the average rate of return of the above products in 2023 is 1.1573%, and the average rate of return of the public offering base is about 1.91% in the same period.
(Article Serial Number: 1780518743256993792)
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