Core Viewpoint - The public fund industry in China is set to undergo significant fee rate reforms, introducing a floating management fee mechanism linked to fund performance, aiming to align the interests of fund managers and investors more closely [1][3]. Group 1: Floating Management Fee Mechanism - Over 20 large fund companies are expected to submit products based on performance benchmarks with a management fee structure comprising a basic fee, potential fees, and excess management fees [2][5]. - The new floating fee products will charge management fees based on the annualized return during the holding period compared to the benchmark, with differentiated fees for different investors based on their actual returns [2][4]. - This innovation emphasizes the anchoring role of performance benchmarks, incentivizing fund managers to pursue excess returns while penalizing them with reduced fees if performance falls short [2][3]. Group 2: Regulatory Emphasis on Investor Interests - The China Securities Regulatory Commission (CSRC) has highlighted the importance of binding fund company income to investor returns, aiming to eliminate the "guaranteed income" model for fund managers [3][4]. - The action plan mandates that new actively managed equity funds adopt a floating management fee model based on performance benchmarks, with specific fee rates determined by the fund's performance relative to the benchmark [3][4]. - The CSRC aims for leading fund institutions to issue at least 60% of their actively managed equity funds under this floating fee mechanism within the next year [3]. Group 3: Historical Context and Future Outlook - Previous fixed fee structures led to dissatisfaction among investors, prompting the introduction of floating fee products in late 2019, which allowed for performance-based fee extraction [5][6]. - Recent floating fee products have shown positive returns, with some exceeding 28% and others achieving over 40% returns, indicating a successful alignment of interests between fund managers and investors [6]. - The floating management fee model is expected to enhance the competitive edge of fund companies by focusing on research and investment capabilities, promoting long-term investment strategies among investors [6].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) has released an action plan to promote the high-quality development of public funds, introducing a new floating management fee mechanism linked to fund performance [1][2]. Group 1: Floating Management Fee Mechanism - The new fee structure stipulates that if a fund's performance meets the benchmark, it will charge the standard fee rate; if performance is significantly below the benchmark, a lower fee rate will apply; and if performance exceeds the benchmark, a higher fee rate will be charged [1][2]. - The floating fee mechanism aims to reduce the "guaranteed income" phenomenon for fund companies, encouraging them to enhance investment capabilities [2][5]. - The CSRC plans to implement this mechanism for newly established actively managed equity funds, with a target that at least 60% of the funds issued by leading firms in the next year will adopt this model [2][5]. Group 2: Historical Context and Current Trends - Since the exploration of floating fee structures began in 2013, the industry has seen continuous innovation, with 249 floating management fee funds reported as of May 7, 2025 [2][3]. - The main types of fee structures include scale-linked fees, holding period-linked fees, and performance-linked fees, with the latter being the most prevalent, accounting for nearly 90% of the market [3][4]. - Historical guidelines from 2017 outlined two main floating fee models: one that adjusts fees based on performance relative to a benchmark and another that charges performance fees based on excess returns [3][4]. Group 3: Future Outlook - The implementation of the new action plan is expected to further popularize the performance-based fee model, leading to a shift from "scale-driven" to "ability-driven" growth in the public fund industry [5]. - The focus on performance will enhance the core competitiveness of fund companies and promote a more competitive industry landscape [5]. - Despite the new fee structures, it is emphasized that investors should consider multiple factors, including the management company's strength and the fund manager's investment capabilities, when making investment decisions [5].