The long-scolded fund commission has been lowered, and the myth of wealth creation in the financial circle has been shattered

Glacier think tank

2024-04-24 10:44Posted on the official account of Zhejiang Glacier Think Tank

Judging from the data of the past two years, not to mention making money for the people, the vast majority of funds have not even outperformed the market. How can a fund that can't help investors achieve value growth be embarrassed to continue to charge a lot of management fees?

Written by丨Chen Bai

The fund commission rate, which has been scolded for a long time, has finally been reduced.

The China Securities Regulatory Commission (CSRC) recently issued the Regulations on the Administration of Securities Transaction Costs of Publicly Offered Securities Investment Funds (hereinafter referred to as the "Regulations"), which will be officially implemented from July 1, 2024.

The reason why the "Provisions" has attracted huge market attention is mainly because it clarifies that it will reduce the commission rate of fund stock transactions and reduce the upper limit of the distribution ratio of fund managers' securities trading commissions. According to the static data in 2023, after the implementation of the "Regulations", the total annual stock trading commission of public funds will be reduced by 38%, and the first two phases of rate reform measures can save investors about 20 billion yuan per year.

In fact, the fund commission is mainly paid to the brokerage, and the proportion of the fund company's overall market is not high, and its greater role mainly shows the regulator's attitude towards the protection of investors' interests.

Still, why this new rule is important. Because compared with management fees, the changes in commission rules have touched the ecology of the industry more. This reduction means that it has directly moved the cake of the entire chain from public funds to securities research institutes and even wealth management and related financial services, and many industries involved may undergo great changes as a result.

In the coming days, the myth of high salaries will never return, and cost reduction, salary reduction, and optimization may become more appropriate keywords.

01

At a public forum, Hu Xijin, a well-known shareholder, expressed dissatisfaction with the fund management fee. He bought several funds and lost money, and they fell very badly, so he believes that the income of fund managers should decline with them, and fund managers should share weal and woe with the people.

It should be noted that, unlike the subscription fee, redemption fee, management fee, etc., which are indicated in the fund file, the commission paid by the fund company to the brokerage has always been opaque, and this commission includes not only the cost of securities trading, but also the hidden expenses such as the cost of purchasing the seller's research report.

Therefore, the reduction of commissions in the "Regulations" is also considered to be the second wave of storm after the regulators intensively issued corresponding regulatory policies for public funds.

The market can be described as a bitter public fund for a long time.

On March 30, 2024, the disclosure of the 2023 annual report of the public fund was completed. According to the statistics of Tianxiang Investment Advisory, the overall loss of public funds in 2023 will be 434.774 billion yuan. If you add the loss of 1.45 trillion yuan in 2022, the total loss in the two years is nearly 1.9 trillion yuan.

According to incomplete statistics, in 2022, the median return of mainland equity funds is -21.05%, while the Shanghai Composite Index fell by 14%, which means that the yield of more than half of the funds has not even outperformed the market. In 2023, the Shanghai Composite Index fell by 3.7% and the Shenzhen Component Index fell by 13.54%, but the average return of equity funds is -13.28%.

In other words, judging from the data, let alone making money for the people, the vast majority of funds have not even outperformed the market. At this point, we have to agree with Hu Xijin again, how can a fund that cannot help investors achieve value growth, how can they be embarrassed to continue to charge a lot of management fees?

The same commission to be borne by the people, in fact, the reason is the same.

However, the commissions paid by the fund to the seller before were on the B side and were not noticed by more people. It was not until April 2023 that the gray curtain of the fund company's sub-position commission was revealed, and everyone suddenly found that the research fee paid by the fund company to the brokerage was much higher than the market price, which not only included the research service fee, but also the cost of the brokerage company's agency fund, the consulting service fee for hiring external experts, and the software fee such as Wind, Hang Seng system, and research report platform - these expenses are all included in the cost of fund assets and are borne by the fund holders.

According to this logic, fund companies basically only have one fund manager. Regardless of the management fee or commission, no matter whether the market rises or falls, it is always the people who pay the bill.

02

It is no wonder that despite the frequent positives, from the feedback from the investor community, shareholders have not changed their views on public funds.

Everyone's more reaction is that "you don't buy funds without handling fees", "the real commission has been 50% off, or 3% off, and it is useless to reduce it or not", and some people said: "The leeks are almost gone, and it is useless to make profits." ”

The market's attitude towards public offerings can also be seen from the collapse of those former star fund managers.

2019 to 2021 is the most glorious period for "star fund managers", at that time, there are countless young people online to "call" fund managers, and the financial circle seems to have a trend of star-making.

At that time, the fund managers who attracted the attention of investors included Zhang Kun of E Fund, Liu Yanchun of Invesco Great Wall, Ge Lan of CEIBS, Cai Songsong of Sino Analytica, etc., and they had the attention of top stars for a while. This high level of attention is also directly reflected in the business, and the products of star fund managers often become popular in seconds.

Now, as fund losses worsen, the myth of many fund managers has been shattered. Not long ago, according to media reports, Cai Songsong and others were tried in the Jinhua City Intermediate People's Court on March 27 for "accepting bribes from non-state functionaries and offering bribes to non-state functionaries."

In the past two years, almost no one has mentioned the glory and madness of fund managers back then. Seeing him rise a tall building, seeing his building collapse, the fall of star fund managers is only in just a few years, but behind it is that the market is quietly undergoing great changes.

The myth of wealth and stars in the financial industry is gradually shattering.

03

This reduction also began to impact another group in the financial circle that was once wildly sought after and made stars - the sell-side analysis team.

Once upon a time, the sell-side created a group of star analysts and chief economists. For example, Ren Zeping, Jiang Chao, Guan Qingyou, Gao Shanwen and others who are now familiar to everyone are all "chiefs" who have experienced market screening and stood out, and their high salaries are also widely praised by the market.

Hundreds of thousands of monthly salaries, millions of annual salaries, is the standard for many chief analysts, this level of salary sometimes even exceeds the brokerage executives - think back then, Evergrande hired Ren Zeping as chief economist with an annual salary of 15 million, although the market was in an uproar, but it was enough to see the degree of market pursuit of sell-side analysts at that time.

Nowadays, judging by the dynamics of these "chiefs", they are less focused on sell-side research. For example, it can be clearly seen from Ren Zeping that since he has become famous, it is more important and cost-effective to better realize his existing reputation.

The good days of sell-side analysts have long since come to an end. In September 2018, the official website of the Securities Association of China issued a statement on the withdrawal of 30 securities firms from the selection of new wealth analysts, and the once sought after selection of new wealth analysts ushered in a turning point.

For brokerage analysts, competing for Vanity Fair, getting a good ranking in the New Fortune Selection, and jumping ship to get a high salary may all come to an end temporarily.

If the dilution of the new wealth selection is more of a mental impact on the seller, then today's commission reduction, the real heartbreaking changes have just begun.

According to the research data of some brokerages, the ratio of public commission distribution in the overall market is 4.5:5.5 between research and non-research in the mutual fund commission distribution, and this ratio may be further skewed to 3.5-4:6.5-7 in the market downturn [1].

Nowadays, with the reduction of the commission rate of mutual funds, it will inevitably lead to a further reduction in research income. The income of the institute continues to decline and cannot cover the expenditure, which will force the institute to control costs, and it will be a high probability event to reduce labor costs.

In addition, another reason is that the market itself is sluggish, and many valuable analyses after the birth of social media do not come from sell-side research, and the interaction between listed companies and investors is still strengthening due to social networks, and the importance of sell-side research is decreasing in terms of its own capabilities and existential value.

Now, the "Regulations" mandate a reduction in commissions, which is likely to be the last straw that crushes this once popular industry. What is touching is that the financial industry, which once made graduates flock, is gradually returning to the reasonable level of the real economy that it should irrigate and support.

This adjustment has tremendous benefits for improving market rules. In those years, the myth of making stars and creating wealth in the financial circle that we are familiar with has been shattered again.

[1] Research is the cost of research services, which is used to pay for research services such as research reports, investment consulting, and market analysis provided by securities companies, and is usually intended to help fund managers make more informed investment decisions;

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Personal opinion, for reference only