China Securities Regulatory Commission to Reduce Fees for Public Offering Funds
On July 8, the China Securities Regulatory Commission (CSRC) announced its plan to reform the fee rates of public offering funds. The measures proposed include launching more floating rate products, reducing the fee rates for active equity funds, standardizing fund sales, and improving the fee rate disclosure mechanism. The CSRC aims to optimize the rate model of public offering funds and gradually reduce the overall fee level in order to promote the healthy development of the industry and protect the interests of investors.
The CSRC stated that it will adhere to market-oriented and legalized principles throughout the reform process. The commission will work to establish a rate system that is suitable for China’s national and market conditions and is compatible with the current stage of development in the public offering fund industry. These efforts are expected to create a more coordinated and supportive relationship between the industry and investors.
As part of the reform, the CSRC plans to reduce the management fee rate and custody fee rate for newly registered active equity funds to not exceed 1.2% and 0.2% respectively. Some leading institutions have already announced that they will reduce their stock product fees to below these levels. By the end of 2023, the remaining stock products are also expected to have their management and custody fees reduced to below the proposed limits.
In addition to fee reductions, the CSRC will also standardize the commission rate for securities transactions of public funds and improve the charges for fund sales. These reforms are expected to be completed by the end of 2023 and 2024 respectively. Furthermore, the CSRC will enhance the fee rate disclosure mechanism for the public fund industry, which is expected to be completed by the end of 2023.
The reform will also focus on launching more pilot products with floating rates, providing investors with more choices. The CSRC has recently accepted 11 floating rate product offering applications, including those linked to the size and performance of the fund. This flexibility is expected to enhance investors’ gains and benefit the industry as a whole.
Industry insiders believe that the fee rate reform is a positive step for investors. It demonstrates the inclusive nature of public offering funds and promotes the alignment of interests between investors and the industry. The reduction in fund fees will lower investment costs for investors and increase their gains. It is estimated that the management fee rate for active equity funds will decrease by approximately 26% by 2025 compared to 2022.
The market-oriented reform of the fee rates is expected to strengthen investment advisory teams and capabilities, better serve the wealth management needs of investors, and promote the high-quality development of the public fund industry. This reform will also benefit institutions that prioritize the interests of investors and have strong investment and research capabilities, compliance, and risk control levels. It will create a more competitive environment that fosters innovation and improvement within the industry.
Overall, the fee rate reform by the CSRC is aimed at promoting the healthy development of the public fund industry, protecting the interests of investors, and attracting long-term funds to enhance the stability and growth of the capital market.