Recently, several money market funds under public fund managers have frequently announced adjustments to management fees, drawing market attention due to an unusual scenario: funds yielding around 1% are charging management fees as high as 0.85% or even 0.9%. Analysis reveals that most of these funds were converted from asset management pooled products and originally adopted a floating fee structure. With recent declines in money market fund yields, the adjustment mechanism has been triggered. Data shows that converted money market funds currently report average 7-day annualized yields below 1%, with some even lower than their 0.9% management fees.
Industry insiders note that fund companies must maintain the status quo until fee regulations are updated. However, fee reductions align with broader market trends, and adjustments are expected as such products proliferate. Currently, the average management fee for money market funds stands at 0.23%, with a median of 0.2%.
**Floating Fee Mechanism in Action** A Shenzhen-based large fund manager announced on December 17 that the management fee for one of its money market funds reverted from 0.30% to 0.85% on December 16. This fluctuation stems from the fund’s prospectus terms: when the 7-day annualized yield calculated at 0.85% falls below or equals twice the demand deposit rate, the fee drops to 0.30% to mitigate negative returns per 10,000 units. The higher fee resumes only after risks subside.
Similar adjustments were observed in funds managed by firms in Beijing and Shanghai. A Beijing-based fund temporarily lowered its fee from 0.90% to 0.30% on December 15, only to revert it to 0.90% on December 14. Meanwhile, a Shanghai fund reduced its fee from 0.90% to 0.25% on December 16 before restoring it the next day. These changes follow rules tied to the 7-day yield relative to twice the deposit rate.
**Legacy of Converted Products** Most affected funds originated from converted asset management plans, inheriting pre-set fee structures. A mid-sized fund manager explained that frequent adjustments reflect low yields triggering fee mechanisms. Unlike typical money market funds, these converted products often retain legacy floating fees, requiring daily yield monitoring.
Wind data shows 103 public funds converted from pooled plans in 2023, totaling nearly CNY 200 billion in assets, including 14 money market funds worth over CNY 150 billion. Among these, nine charge fees above 0.70%, with five at 0.9%—far exceeding the industry’s 0.23% average. On December 16, the 7-day yield for these 14 funds mostly stayed below 1%, with some under their own management fees.
**Investor Considerations** While high fees appear disproportionate, they stem from historical contexts. Originally catering to stock investors’ idle cash, these products targeted risk-tolerant users indifferent to fees. Post-conversion, fee adjustments require investor approval. Though firms lack immediate incentives to cut fees, market pressures may drive future changes.
Beyond fees, investors should monitor post-conversion shifts in strategies and managers. Most converted funds are now managed by public fund managers, often with new leadership. Such changes may alter risk-return profiles, warranting cautious observation before investment decisions.
As the asset management industry evolves, attention to these legacy issues will grow, with market forces likely prompting eventual fee realignments.