A new wave of fund fee reduction is coming, and the "big money attractor" broad-based ETFs have become the main battleground.

On October 14, Bosera Fund announced that the management fee rate of Bosera ChiNext ETF (159908) was reduced from 0.50% to 0.15%, the custody fee rate was adjusted from 0.10% to 0.05%, and the sales service fee for the C-class connected fund was adjusted from 0.40% to 0.10%. On October 9, China AMC also announced fee reduction measures for its ChiNext 100 ETF China (159957) and its connected fund.

In addition, Penghua CSI 300 ETF, Jing Shun Great Wall ChiNext 50 ETF, Southern CSI 300 ETF, ICBC CSI 300 ETF and other broad-based funds have also joined the "fee reduction army" one after another.

In the view of industry insiders, the reduction of ETF fees is conducive to attracting more funds. In order not to fall behind in the fiercely competitive track, the fee rate has become a breakthrough for creating differentiated competitive advantages. On the other hand, reducing fees is also a manifestation of the fund industry's adaptation to market changes and response to regulatory requirements.

Advertisement

"The intense competition in the industry drives the trend of fee reduction, especially for equity ETFs," said Shen Juan, an analyst at Huatai Securities. "Against the backdrop of the current domestic ETF competition, the deepening of public fund fee reform, some fund companies take the lead in implementing low-fee strategies, expand market share, and increase fund scale." In Shen Juan's view, the management fee rates of many equity ETFs have been adjusted to the lowest level in the industry. Referring to the development experience of the industry, future style and industry ETFs will have a larger room for fee reduction.

Wang Zhijian believes that since Asian ETF investors are not very sensitive to management fees when choosing ETFs, ETF issuers may not immediately see an increase in fund inflows after the fee reduction. Therefore, ETF issuers may need to wait for some time before the fee reduction gradually has an impact on fund inflows.

Broad-based ETFs have reduced fees intensively.

Benefiting from policy support, market effectiveness improvement and other factors, equity ETFs have expanded rapidly in the recent stock market rebound, with the scale breaking through the 3 trillion yuan mark, among which broad-based ETFs have become the main force for attracting funds.

Data shows that as of October 11, the net asset value of Huatai Bo Rui CSI 300 ETF reached 401.08 billion yuan, ranking first and becoming the first non-cash fund with a scale exceeding 400 billion yuan. In addition to Huatai Bo Rui CSI 300 ETF, there are 7 other funds with a current scale of more than 100 billion yuan, including Easy Fund CSI 300 ETF, Harvest CSI 300 ETF, etc.

The acceleration of fund inflows is inseparable from the eye-catching performance of broad-based indices. Taking the CSI 300 index as an example, the year-on-year increase of 15% exceeded the year-on-year increase of half of the individual stocks.As consensus forms around the layout of A-shares through ETF products, broad-based ETFs are experiencing a wave of fee reductions.

On October 8th, Penghua Fund announced that the annual management fee rate for Penghua CSI 300 ETF was reduced from 0.50% to 0.15%, and the annual custody fee rate was reduced from 0.10% to 0.05%. The reduction in fees is quite significant. On September 30th, Guotai Fund released an announcement stating that starting from October 8th, the management fee rate for Guotai CSI 300 Enhanced Strategy ETF would be reduced, with the annual management fee rate being lowered from 1% to 0.50%.

In addition to the aforementioned ETFs, Taikang Zhongzheng 500 ETF, Guangfa Zhongzheng 1000 ETF, ICBC CSI 300 ETF, Southern CSI 300 ETF, and Jing Shun Great Wall ChiNext 50 ETF have also previously announced fee reductions.

A public fund industry insider stated that recently, many fund companies have joined the ETF fee reduction trend, mainly hoping to attract more investors by lowering fees.

Industry competition drives the trend of fee reduction

ETFs, with their flexible trading, transparent holdings, and diversified investments, have become an investment tool for investors to "jump on board" with a single click and have also become a key battleground for major fund companies.

According to statistics from Huabao Fund, this year, the scale growth rate of stock ETFs is significantly higher than that of other types of ETFs. As of October 11, 2024, the scale of ETFs in the entire market has increased by 1.52 trillion yuan compared to the beginning of the year. Among them, the scale of stock ETFs increased by 1.39 trillion yuan, with 94 new stock ETFs contributing to the main increase in scale; the proportion of the scale of stock ETFs in the entire market's ETFs has risen from 70% to 80%.

As ETFs achieve leapfrog development, the homogenization competition among ETFs is also intensifying.

In the ETF market, there are many products tracking the same index, and these products often have similar investment targets and strategies, with performance that is not significantly different. Therefore, reducing costs has become an important measure to enhance competitiveness. The reduction of management and custody fees has significantly reduced the cost expenditure for investors during the investment process. Both long-term holders and investors with larger capital can truly feel the benefits of reduced costs and obtain higher net returns. This has increased the product's attractiveness to cost-sensitive investors, bringing more capital inflow to the product.

"Reducing ETF fees is also an aspect of enhancing ETF competitiveness." In the view of industry insiders, simply reducing ETF fees does not necessarily lead to an increase in ETF scale. The scale of ETFs is related to the market capacity of the tracked index itself, and investors will also consider factors such as ETF scale and market liquidity when choosing ETFs. Therefore, fee reduction cannot become a long-term competitive tool for ETFs.Style and Industry ETFs Have Significant Room for Fee Reduction

Recently, with the approval of the Central Financial Commission, the Central Financial Office and the China Securities Regulatory Commission jointly issued the "Guiding Opinions on Promoting Medium and Long-term Capital into the Market," which proposed to "steadily reduce the comprehensive fee rate of the public fund industry."

Under the guidance of the regulatory authorities, the public fund industry's fee reform has completed the first two stages of work. The third stage, which will focus on the fund sales process, standardizing subscription fees and other sales-related expenses, and promoting the transition of fund back-office operation service outsourcing pilot programs to regular operations, will be completed by the end of this year. This will further improve the fee structure.

Looking at the entire public fund industry chain, the fee reform may have an impact on reshaping the competitive landscape and the development of business layout to a certain extent. Industry insiders have said that the fee reform is conducive to forming a good industry development ecosystem, guiding the industry to continuously give benefits, and promoting the stable and healthy development of the capital market.

Looking at the global ETF market, over the past decade, the overall management annual fee of U.S. ETFs has also shown a downward trend, and low-fee products are more favored by investors. However, in recent years, the downward trend of U.S. ETF fees has slowed down, and some product categories have seen a fee rebound. On the one hand, fierce market competition has prompted many fund companies to continuously reduce fees to compete for market share, and with the development of the industry, operational management technology has improved and economies of scale have become apparent. On the other hand, a large influx of funds has eased competitive pressure. New thematic and actively managed ETFs, due to their higher investment strategies and management difficulties, have higher management fees than ordinary passive management ETFs, which has raised the overall asset-weighted ETF management annual fee.

Many industry insiders also believe that in terms of competitive strategy, fee reduction can be an important means of gaining market share, but excessive price wars should be avoided.

Shen Juan believes that there is still room for fee reduction in style index and industry index ETFs. Currently, due to relatively low internal competitive pressure, the management fee rate of style index and industry index ETFs is still at a relatively high level. However, referring to the experience of industry development, fee reduction will become a general trend. It is expected that in the future, style and industry ETFs will have significant room for fee reduction.