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There is considerable controversy in the industry about the possibility of adopting a dual charging model for internal FOF products.
Now there are more than 4,000 funds on the market, and it is more difficult to select funds than to choose stocks. Voluntary purchase of FOF is to enjoy the asset management services of professional institutions and should be paid.
The first batch of approved public offering FOF products are in the process of preparation.
Previously, the industry has been controversial about the possibility of adopting a dual charging model for internal FOF products. As the FOF birth date approaches, discussions surrounding FOF charges have intensified.
"As an active management product, the management fee rate of FOF products may refer to active equity products." A fund analyst in Beijing told the International Finance News reporter that "the current public equity product management fees for active equity are generally 1.5% or so."
So, will higher fees become a disadvantage for public offering FOF products? For investors, the investment cost of these new products is geometric?
It is difficult to learn from overseas experience. "The most mature FOF development is the United States. The largest FOF fund manager in the United States is Vanguard." Lu Qing (a pseudonym), a Shanghai FOF practitioner, told the International Finance News reporter that "the low rate is Vanguard." One of the main reasons for the popularity of FOF products."
Zhao Wei, general manager of Pioneer Pilot Investment Management (Shanghai), said: "We had at least $320 billion in net inflows last year. This means that 9 of the 10 dollars flowing into the US public fund market have arrived at Vanguard." Understand that Vanguard Target Retirement 2025, the largest single of The Vanguard Group, has a total asset size of $35.7 billion as of May 2017.
It is worth noting that the total rate of the FOF products including the sub-fund management fee is only about 0.14%, which is far lower than the rate of domestic public funds. Lu Qing said: "At present, the domestic index fund rate is generally 0.6%, and the FOF rate is definitely higher than this."
Hua Bao Securities Fund analyst Guo Wei said: "The current US FOF management model mainly includes internal FOF managers + internal funds, internal FOF managers + full market funds, third-party FOF investment consultants + internal funds, third-party FOF Investment consultants + external funds and full outsourcing."
“The internal FOF administrators are divided into internal funds and full-market funds. Their charging methods are different. Investing in internal fund FOF products, the parent fund does not charge fees, only the sub-fund fees are charged, and the investment is external. The fund charges a higher management fee." Guo Wei said, "The Pioneer Pilot Group is taking the "internal FOF manager + internal fund" model."
However, the experience of the Pioneer Group is difficult to replicate in China. Guo Wei said frankly: "The main reason for the Vangard fund company model is that Vangard has a rich product line." According to statistics, as of July 22, 2016, Vangard had 127 non-trading public funds and 55 trading ETFs. Among them, 127 non-trading public funds include: currency type (tax-paying and tax-free), bond type, investment grade type (in the stock market, investment grade stocks generally refer to a financially sound, capital-rich, reputation For companies with industry leadership and investment potential; in the bond market, generally refers to bonds with a credit rating of BBB or higher), low investment grades (such as investing in high-risk high-yield bonds, etc.), target date type , traditional, management income growth focus, emerging market type.
In China's public fund companies, only 30 fund companies such as Boss, Dacheng and Fuguo have laid out product lines: stock, hybrid, bond, money market, alternative investment and QDII funds.
For QDII funds, QDII funds can be divided into stock, hybrid, bond and alternative investments. "At present, there are no fund companies that can fully deploy these major categories. Only a number of public fund companies such as Penghua Fund and Southern Fund have most QDII type funds." Guo Wei believes that "the domestic can be an internal FOF manager + internal There are fewer fund companies in the fund, and most fund companies with insufficient product lines need to operate in accordance with the "inside FOF management model + full market fund" investment model."
It is reported that the FOF products of the first six fund companies that have obtained approvals are all market-wide FOF.
Double charges are "pseudo-propositions"
There is also a double charge issue between the parent fund and the sub-fund of FOF products.
Guo Wei said that "the problem of double fees has always been the primary problem that plagues FOFs in various countries." FOF's sub-funds will charge various fees such as redemption fees, management fees, custody fees, etc., while the FOF mother fund is an independent fund. Fund products are also subject to subscription redemption fees, management fees, custody fees and other fees.
Sang Liuyu, chief analyst of the Kaishi Financial Products Research Center, said that the internal FOF management rate is significantly lower than the external FOF. Internal FOFs are often accused of charging two management fees, so the general internal FOF may no longer charge a management fee, or the management fee rate is lower. The center counts the US internal FOF rates and finds that it is significantly below the FOF average rate, which is significantly lower than the average mutual fund rate. For example, the internal FOF rates of stock, hybrid and bond are only 0.56%, 0.42% and 0.47%, respectively, while the external FOF rates of the same type are above 1%. The mutual fund rates of the same type are respectively (Arithmetic mean) 1.37%, 1.25%, 1%, the internal FOF has a significant advantage in terms of rate.
Wang Qunhang, director of the Ji'an Jinxin Fund Evaluation Center, believes that “double fees are a false proposition. The public offering FOF is essentially a public fund, but the investment target is different. The public fund FOF also involves active management, involving research, investment, sales, and liquidation. There are costs in waiting for the business. Now there are more than 4,000 funds in the market, and it is even more difficult to select funds than to choose stocks. Voluntary purchase of FOF is to enjoy the asset management services of professional organizations, which should not be paid. A certain fee?"
In Wang Qunhang's view, there is no unreasonable charge for charging every process of asset management services. "If investors feel that the fees are relatively high in service, they will naturally vote with the feet to adjust the market."
The rate is better than private placement. "In fact, the management fees of public funds are not high." Wang Qunhang further said.
According to its statistics, as of June 30, 2017, the nominal management cost of the Chinese public fund industry was 0.92%, and the actual management cost was 0.57%.
A private equity FOF practitioner in Shanghai told the International Finance News reporter: "The rate of private placement FOF generally includes subscription fees, redemption fees, management fees, and performance remuneration. Among them, the subscription fee is generally 1%, and the redemption fee is generally one. Exemption for more than one year, about 3% for one year, management fees generally receive 1.5% to 2%. Performance remuneration is generally accrued once a year, collecting 20% ​​of the fund's excess income." That is, if you buy one For private equity FOF products, the annual revenue of this product is 10%, and the actual income of investors is only about 6%.
The biggest difference between public funds and private equity funds is reflected in the fixed and transparent rates. Although the rate of public funds is slightly higher, it will not withdraw performance compensation for the excess income.
Wang Qunhang suggested investors: "More attention should be paid to the investment income of public fund managers, rather than always paying attention to management costs. After all, as long as the benefits are better, they can cover the costs."
(Editor: He Yihua HN110)
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