Tianhong Yu'e Bao, the public fund industry's largest and most prominent money market fund, has drawn market attention with its fee reduction initiative.

On September 23rd, Tianhong Fund Management announced that following consultations with custodian bank CITIC Bank, it decided to reduce the custodian fee for Tianhong Yu'e Bao Money Market Fund from the previous annual rate of 0.08% to 0.07%. The adjusted rate took effect immediately.

Since the launch of public fund fee reforms, actively managed equity funds, index funds, and bond funds have successively initiated large-scale fee reductions, while money market fund fee cuts have primarily occurred on a smaller scale. Now, with Tianhong Yu'e Bao's nearly 800 billion yuan scale fund reducing custodian fees, what does this signify?

Industry professionals indicate that Yu'e Bao's fee reduction may drive other large and medium-sized money market funds to follow suit with rate adjustments, thereby pushing down the overall fee level for money market funds. Additionally, large-scale money market fund fee reductions will intensify industry competition in the short term, forcing the industry to enhance management capabilities. For investors, reducing money market fund management and custodian fee rates directly lowers investment costs, and in an environment where money market fund yields are generally low, this can reduce fee erosion on returns and improve investors' actual returns.

Since the beginning of this year, the trend of money market fund fee reductions has become apparent. On the same day as Yu'e Bao's fee reduction, E Fund Management and Guoxin Guozheng Fund respectively announced adjustments to reduce management and custodian fee rates for their money market funds. Meanwhile, Dongzheng Ronghui Asset Management, Xingzheng Asset Management, and Changjiang Securities Asset Management announced matters related to reducing applicable management fee rates for money market funds.

**Six Money Market Funds Announce Fee Reductions on Same Day**

The fee reduction wave in the public fund industry has spread to large-scale money market funds.

Starting September 23rd, Yu'e Bao's custodian fee was reduced from the previous annual rate of 0.08% to 0.07%. As of the end of Q2 2025, Tianhong Yu'e Bao's assets under management reached 793.219 billion yuan, making it the largest money market fund in the public fund market.

After this fee reduction, its custodian fee rate remains slightly higher than the industry average. Wind data shows that as of September 23rd, the average custodian fee rate for money market funds was approximately 0.06% annually.

Currently, Yu'e Bao's management fee rate and sales service fee rate are 0.3% and 0.25% respectively, both slightly higher than industry averages.

Besides Tianhong Fund, five other fund management companies announced money market fund fee reductions on September 23rd. Among them, E Fund Management and Guoxin Guozheng Fund respectively announced reductions in custodian and management fee rates for one money market fund each. Specifically, starting September 23rd, Guoxin Guozheng Cash Enhancement's annual management fee rate was adjusted from 0.30% to 0.20%, and its annual custodian fee rate from 0.10% to 0.07%. Starting September 26th, E Fund Margin Income's annual management fee rate was reduced from 0.20% to 0.15%, and its annual custodian fee rate from 0.08% to 0.05%. These fund companies stated that the fee reductions were implemented to better meet investors' investment and wealth management needs and reduce investment costs.

The continuous decline in seven-day annualized yields of money market funds is also an important factor behind the fee reductions.

Senior analyst Wu Yuening from Morningstar (China) Fund Research Center noted that the concentrated reduction in custodian fees by money market funds is primarily due to underlying asset yields continuing to decline with market interest rates, with seven-day annualized yields generally falling to around 1%. The "erosive" effect of fees on net value has significantly amplified, making fee reduction an inevitable choice for fund companies to enhance product competitiveness.

Additionally, "regulatory authorities have been continuously promoting public fund fee reductions and benefiting investors. The 'Action Plan for Promoting High-Quality Development of Public Funds' issued by the CSRC has explicitly proposed guiding industry institutions to appropriately reduce management and custodian fee rates for large-scale index funds and money market funds, providing policy direction for money market fund custodian fee reductions," she explained.

Furthermore, Dongzheng Ronghui Asset Management, Xingzheng Asset Management, and Changjiang Securities Asset Management respectively announced matters related to reducing applicable management fee rates for money market funds.

The applicable management fee rate refers to a special arrangement regarding management fees in fund contracts.

For example, the fund contract and prospectus of Xingzheng Asset Management Qilin Cash Plus Money Market Fund stipulate that "when the seven-day annualized estimated yield calculated with a 0.70% management fee is less than or equal to twice the current deposit rate, the fund manager will adjust the management fee to 0.30% to reduce the risk of negative estimated net income per 10,000 fund units and subsequent settlement overdrafts by sales institutions, until such risks are eliminated..." Due to this situation occurring, the fund's management fee rate was adjusted to 0.30% on September 21, 2025. Once the situation is resolved, the management fee rate will revert to 0.70%.

Due to similar circumstances, Changjiang Money Manager's management fee rate was reduced to 0.25% annually starting September 22, 2025, and Dongzheng Ronghui Cash Manager Money Market Fund's management fee rate was reduced to 0.30% annually starting September 21, 2025. Once special circumstances are resolved, both funds' management fee rates will revert to 0.90% annually.

**What Are the Implications?**

Looking at the longer term, money market fund fee reduction trends have become apparent this year.

According to Wind statistics, approximately 16 money market funds have reduced management fees, 11 have reduced custodian fees, and nearly 30 have reduced sales service fees this year.

Regarding fee rates, as of September 23rd, the average levels for money market fund management fees, custodian fees, and sales service fees were 0.239%, 0.059%, and 0.129% respectively. At the end of last year, these three fee categories averaged 0.246%, 0.060%, and 0.137% respectively. This indicates that all three money market fund fee categories have shown declining trends this year.

Notably, as the "giant" among money market funds, Yu'e Bao's fee reduction may further accelerate the pace of money market fund fee reductions.

"Yu'e Bao's fee reduction will pressure the entire industry to reduce fees. Historically, Yu'e Bao has never reduced fees, so this custodian fee rate reduction of 0.01% is viewed as an industry 'bellwether.' From the industry average perspective, money market fund management and custodian fee rates are significantly higher than index funds. Yu'e Bao's custodian fee reduction will pressure other fund companies, and more leading money market funds are expected to follow suit," analyzed Bi Mengchen, a research analyst at Lattice Fund Research.

In Bi Mengchen's view, large-scale money market fund fee reductions will intensify industry competition in the short term, forcing the industry to enhance management capabilities.

"Fee reductions may compress fund companies' profit margins in the short term, requiring them to retain customers through optimizing operational efficiency and improving investment research capabilities and customer service levels. In the long term, this competition benefits the overall industry by raising professional standards and management efficiency," she stated.

Wu Yuening holds similar views. She believes that as the largest money market fund in the market, Yu'e Bao's fee reduction has industry demonstration effects and may drive other large and medium-sized money market funds to follow with rate adjustments, thereby pushing down overall money market fund fee levels.

For investors, fund fee reductions will directly reduce investment costs.

Bi Mengchen noted that money market fund management and custodian fees are directly deducted from fund assets. Lower fee rates mean that daily net income distributable to investors will increase accordingly. For investors, money market fund fee reductions will reduce holding costs, thereby improving actual returns.

Additionally, "fee reductions strengthen money market funds' inclusive finance attributes as cash management tools. In an environment of declining bank deposit rates, fee reductions enhance money market funds' relative competitiveness, helping attract more low-risk preference capital inflows," Bi Mengchen stated.

Wu Yuening also analyzed that reducing money market fund management and custodian fee rates directly lowers investment costs. In situations where money market fund yields are generally low, this can reduce fee erosion on returns, improve investors' actual returns, enhance money market funds' attractiveness to ordinary investors, strengthen inclusive finance attributes, and help public funds attract more low-risk preference capital back.