Mutual fund products launched "second fee reduction"

　This newspaper reported that public fund products opened the "second fee reduction".

　　Since the reform of the public fund rate, a number of public fund products have successively implemented a multi-stage fee reduction action with management fees and custody fees as the core, public fund transaction commissions as the core, and fund sales fee reduction as the core. Since the beginning of this year, as of June 23, at least 164 fund products (different shares are calculated separately) in the whole market have announced a reduction in management fees. Among the funds that have reduced their management fees, there is a new trend of "secondary fee reduction".

　　So, why are many products "reduced for the second time"? In addition to "cost reduction", in what aspects should fund companies increase investment to "increase efficiency"?

"Second fee reduction" for a variety of fund products

　　Recently, a number of fund companies have announced that they will reduce the management fees of some of their flexibly allocated hybrid funds.

　　On June 21, the Great Wall Fund announced that it decided to reduce the management fee of the Great Wall Jiuyi flexible allocation mix and other fees from June 24, 2024, of which the management fee was adjusted from 1.20% to 0.40% of the annual rate. On the same day, ICBC Credit Suisse Fund also announced that the annual management fee rate for ICBC Credit Suisse Dividend Preferential Flexible Allocation Mix was adjusted from 1.0% to 0.6%.

　　In addition to these two funds, Guorong Fund and Taixin Fund have also recently adjusted the rates of some of their flexible allocation hybrid funds.

　　So, why is the "cost reduction and efficiency increase" of the public offering industry so violent?

　　Behind the continuous fee reduction, there is the impact of the industry's fee reduction trend, and there are also the considerations of various fund companies based on continuous marketing.

　　To explain this problem, we must first clarify what the income composition of public funds is. Generally speaking, the fees of public funds include the following aspects: first, transaction costs, including subscription fees, subscription fees, redemption fees, floor trading commissions, etc.; The second is the fund's operating costs, including custody fees, switching fees, trailing commissions and other operating expenses; In addition, there are some important floating costs, including fund management fees and performance compensation.

　　Among them, management fees are naturally the main source of income for public funds. According to Wind data, management fees generally account for more than 80% of fund companies' revenue, and it is not uncommon for them to exceed 90%, which is the main force of public fund income.

　　In the past few years, on the one hand, the market has been volatile and adjusted, the money-making effect of public funds has weakened, and the issuance of equity products has fallen to the freezing point, and fund managers mainly based on active equity products have been greatly impacted; On the other hand, in the second half of 2023, the reform of public fund rates will be officially launched, and third-party data estimates that the management fee income of nearly 10 public offering institutions is expected to decrease by more than 500 million yuan compared with the end of 2023, and the management fee income of about 30 institutions will decrease by more than 100 million yuan.

　　In addition, among these funds that have recently announced fee reductions, there has been a new situation of "secondary fee reduction". For example, the ICBC Credit Suisse Dividend Preferential Flexible Allocation Hybrid Securities Investment Fund, which just announced a fee reduction this month, lowered the annual management fee rate from 1.5% to 1.0% for the first time in May last year, and recently lowered it from 1.0% to 0.6%. Another example is Taixin Xinli Hybrid Securities Investment Fund, which lowered the annual management fee rate from 1.2% to 0.4% for the first time in June last year, and recently lowered it from 0.4% to 0.3%.

　　According to incomplete statistics, since the reform of public fund rates, at least 17 funds in the whole market have implemented two annual fee reductions for management fees. Most of the fund products of the "second reduction" are equity funds, such as Guorong Rongtai Flexible Allocation Hybrid Securities Investment Fund, Donghai Beautiful China Flexible Allocation Hybrid Securities Investment Fund, Guolian High Dividend Select Mixed Securities Investment Fund, Wells Fargo Large Cap Value Quantitative Select Mixed Securities Investment Fund, etc. There are also a small number of bond funds, such as Wells Fargo Pure Bond Bond Initiation Securities Investment Fund.

The thinking behind the "fee reduction".

　　In the context of increasingly fierce market competition, many fund companies have chosen to take the initiative to reduce the management fee rate of their funds, which may be aimed at attracting more investors and enhancing the market competitiveness of their products. By significantly reducing management fees, fund companies hope to attract investors with lower fees, expand the size of the fund, and improve the overall performance of the fund.

　　For investors, the reduction in fund management fees is undoubtedly good news. The reduction in management fees means that investors can afford less expense costs, which can lead to higher investment returns. For example, the management fee rate of the Great Wall Jiuyi Flexible Allocation Mixed Fund has been reduced from 1.20% to 0.40%, which means that investors can save 0.80% of their expenses every year. If the fund performs well, the actual returns for investors will be more substantial.

　　The continuous reduction of public funds is closely linked to the responsibility of reducing investors' costs and enhancing investors' happiness.

　　Yan Yichun, an analyst at Caixin Securities, said that reducing the management fee rate is conducive to reducing investor costs, improving investment returns, and also promoting the participation of all participants to maintain a high level of competition and promote the survival of the fittest in the industry.

　　A "veteran" of public funds in Beijing who has been in the industry for more than ten years said that the reform of public fund rates has a far-reaching impact. In the short term, the pressure caused by the decline in revenue after the reduction of various rates is the "labor pain" that fund companies must experience. But in the medium to long term, the fund industry can only win if investors win. The implementation of the reform of the public fund rate is an important embodiment of the benefit to investors, which will further promote the alignment of the interests of the fund industry and investors.

Where are fund companies heading in the future?

　　Where will fund companies go in the future? Where are the new revenue growth points?

　　In this regard, Dou Yuming, chairman of CEIBS Fund, pointed out that with the continuous improvement of residents' demand for wealth management, the public fund industry may face three stages of development. The first stage emphasizes individual ability, the second stage emphasizes team ability (i.e., the industrialization stage), and the third stage will usher in the stage of digital intelligence and man-machine combination.

　　At this stage, China's fund industry is undergoing a stage of transformation from individualization to industrialization. The so-called industrialization stage is to do a good job in internal collaboration, professional division of labor, and team collaboration, so that everyone can collaborate more and more efficiently, and rely more on the platform rather than individual strength to make long-term performance more stable and predictable.

　　Guotai Fund said that at the level of product layout, the future growth point is to meet the segmented needs of investors. At present, the total scale of public funds has exceeded 30 trillion yuan, and different product types have been able to meet the allocation needs of most investors, but there is still room to be explored. In addition, we will continue to improve our investment and research capabilities, improve investors' sense of gain, and obtain high-quality scale growth on the basis of trust, while at the level of investment layout, the future growth point lies in finding potential investment targets.

　　Some public offering executives admit that in the short term, management fees are still the main source of the traditional revenue model of public offerings, but looking ahead, there are several aspects that should be considered as new revenue growth points based on customer needs.

　　The first is the provision of comprehensive solutions, including strategy services, configuration services, product packages to continuous research reports, that is, from the previous model of simply buying products to selling solutions and services. The second is ESG research and solutions, public funds have a strong competitive advantage in ESG research system, technology and data precipitation, and in the context of green finance, it will also be a trend to provide institutional investors with comprehensive ESG services including scoring research and solutions. Another very important direction is financial technology services, public funds have deep precipitation advantages in finance, and leading companies in data are also competitive in financial technology services.