The reform of the public offering fund fee rate is expected to boost the high-quality development of the public offering fund industry in China. The China Securities Regulatory Commission (CSRC) recently announced a work plan to comprehensively optimize the fee rate model of public offering funds and gradually reduce the industry’s overall fee rate level. Several leading fund companies, including E Fund, Huaxia, Harvest, Industrial Securities Global, and China Europe, have already announced reductions in their management fee rates and custody fee rates.
Starting from July 10, these companies will reduce the management fee and custody fee rates of some of their products to 1.2% and less than 0.2% respectively. E Fund, for example, will lower fee rates for 90 of its products, with management fees reduced from 1.5% to 1.2% for 74 active equity funds and custody fees reduced to 1.2% from 0.2%. GF Fund will also reduce the fee rates of 119 of its products, most of which will see management fees decreased from 1.5% to 1.2% and custody fees from 0.25% to 0.2%.
The reduction in fee rates by these leading fund companies is seen as a positive development for the industry. Lowering fees is considered to be in the best interests of investors and will enhance the overall competitiveness of the industry. It is expected to attract more long-term funds, such as pension funds and insurance funds, which will contribute to the development of equity funds and the capital market. Lower fees will also help to improve the fairness of income distribution within the industry and promote the sustainable and healthy development of the fund industry.
The CSRC has conducted extensive research and listened to market opinions to formulate a work plan for the fee rate reform of the public offering fund industry. This plan aims to guide the industry in implementing the fee rate reform in a stable and orderly manner. The reform will be carried out in stages, with newly registered products having a maximum management fee rate of 1.2% and custody fee rate of 0.2%. Leading institutions have announced reductions in fee rates for their stock products, and the remaining stock products will also see fee rate reductions by the end of 2023.
In addition to the fee rate reform, the CSRC will also standardize the commission rate of public offering fund securities transactions, improve the disclosure mechanism of fee rates, and revise regulations related to the fees for the sales of public funds. These reforms are expected to be completed by the end of 2023 and 2024 respectively.
The fee rate reform is seen as a crucial step towards the high-quality development of the public offering fund industry. By reducing fees, the industry can shift its focus from scale expansion to increasing fund returns and risk control. This will lead to the improvement of the industry’s quality and efficiency, as well as its ability to serve major national strategies and residents’ wealth management needs. It will also encourage fund managers to enhance their active management capabilities and achieve sustainable development.