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 review the case studies of China Merchants Asset Management's products against regulatory documents and the latest financial report data.
According to the 2023 annual report, China Merchants Asset Management Zhiyuan Tiantianli achieved a yield of 1.1639% in 2023, which was lower than the average rate of return of 1.91% for money market funds in the same period, ranking 751/774 among public money funds. In the first quarter of 2024, the net value of the fund increased by 0.2981%, with a total profit of about 112 million yuan.
Although the performance is not good, according to the rate rules set by China Merchants Asset Management Zhiyuan Tiantianli, the product may still charge 0.9% management fee, 0.25% sales service fee, and 0.05% custody fee in 2023, and the three comprehensive rates are as high as 1.20%, which is at a high 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 2023 yield is 1.1639%, compared to the peer average of 1.91%
China Merchants Asset Management Zhiyuan Tiantianli was established on April 25, 2022, and the net asset value of the fund reached about 36.608 billion yuan at the end of the first quarter of 2024. 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.
According to the data, the fund will achieve a return of 1.1639% in 2023, which is lower than the average return of 1.91% for money market funds in the same period.
As of May 9, 2024, the fund has returned approximately 2.40% since its inception, while the money market average has returned approximately 3.78% over the same period.
The combined fee rate is as high as 1.2%, or more than 270 million more management fees are charged to investors
Even if the performance ranks low and significantly underperforms the average of the same category, China Merchants Asset Management Zhiyuan Tiantianli can still charge about 3 times the management fee of the market average.
According to the fund prospectus, the management fee rate of China Merchants Asset Management Zhiyuan Tianli has set up a "floating" mechanism. According to the fund contract, when the 7-day annualized provisional rate of return calculated at 0.90% of the management fee is less than or equal to 2 times the current deposit interest rate, the fund manager will adjust the management fee to 0.30 to reduce the risk of negative provisional net income per 10,000 shares of the fund and trigger the risk of overdraft settlement by the sales agency, until such risk is eliminated, the fund manager can resume the provision of 0.90% management fee.
Wind data shows that since its establishment, the fund's 7-day annualized provisional yield has been the lowest value of 0.8850%, which has not touched the benchmark of rate downgrade (about 0.7% for 2 times the current deposit rate), and the management fee may be charged at 0.9% during the period.
At present, the management fee rate of the public offering base is mainly concentrated in 0.15-0.33%, with a median of 0.25%, and the 0.9% management fee of China Merchants Asset Management Zhiyuan Tianli ranks the highest in the industry. In 2023, China Merchants Asset Management Zhiyuan Tiantianli has collected management fees of approximately RMB374 million, which is more than RMB270 million more than the market average (calculated on a median basis).
In addition to the management fee, the fee structure of China Merchants Asset Management Zhiyuan Tianli also includes a custody fee of 0.05% and a sales service fee of 0.25%, and the annualized total fee rate of the product is about 1.2%, which is at a high level in the public offering base.
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 asset management plan is transformed into a public offering, it still charges a higher management fee than the same type while canceling the performance remuneration.
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: 1788779322866274304)
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