As the largest money market fund in China, “Tianhong Yu’e Bao” announced a reduction in custody fees starting from September 23, lowering the annual rate from 0.08% to 0.07%. This adjustment marked the first time the fund had revised its custody fees since its establishment in 2013, reflecting the ongoing pressure on the returns of money market funds.
According to data from Wind, as of September 23, the average 7-day annualized yield of 937 money market funds in the market was only 1.24%, a decrease of 0.38 percentage points compared to the same period last year. The yield of “Tianhong Yu’e Bao” dropped even further to 1.02%, hitting a new low since its inception. This year, the number of high-yield money market funds has sharply declined, with only 9 funds maintaining a yield of over 2%, while the number of funds with yields below 1% has notably increased.
Currently, more than 50 money market funds have announced reductions in management fees or custody fees. Several products such as Guoxin Guoce Cash Enhanced Income and E Fund Margin Guarantee have officially announced fee reduction measures, generally ranging from 0.05 to 0.1 percentage points.
Industry insiders pointed out that the declining yield has weakened the attractiveness of money market funds, prompting fund companies to proactively reduce fees as a key strategy to cope with market competition. With intensifying competition, the trend of declining fees for money market funds is expected to continue.
The continuous decrease in yields not only impacts investors’ experiences but also triggers passive fee reduction mechanisms in some fund contracts. For instance, Xingzheng Fund Management’s Golden Unicorn Cash Enhancer has repeatedly lowered management fees due to the 7-day annualized yield being insufficient to cover the original fee rate. Similar situations have recently emerged in products from China Merchants Fund Management and Changjiang Fund Management.
In terms of scale, some money market funds have significantly shrunk. Data from Wind shows that as of the end of June, over 40% of the 363 money market funds have reduced their scale. For instance, ICBC Fortune Fund’s scale dropped from 77.588 billion yuan to 37.755 billion yuan in the first half of the year, while Foresea United Horizon Money Market Fund shrank by over 90%. To maintain stable operations, several funds have announced the suspension of large purchases.
Since its launch in 2013, Yu’e Bao has rapidly gained popularity due to its characteristics of “low threshold” and “redeemable at any time,” propelling Tianhong Fund to the top of the industry. However, in recent years, its yield has been on a continuous decline, dropping below 2% from 2020 to 2023 and entering the “1% range” this year. Data shows that the 7-day annualized yield of Yu’e Bao reached 2.45% in early 2024 but steadily fell to 1.02% by September 23.
Industry analysis suggests that with the downward trend in market interest rates and certificate of deposit rates, money market fund yields may continue to be under pressure, gradually weakening their relative advantages over bank deposits, and potentially slowing down future growth in scale.
As the manager of Yu’e Bao, Tianhong Fund Management Co., Ltd. focuses on the operation of money market funds. Money market funds are open-end funds that pool idle funds from society, invest and operate them by the fund manager, and entrust them to a custodian for safekeeping.
Users can directly purchase Yu’e Bao funds through Alipay to achieve capital appreciation and support withdrawal or consumption at any time. Its income mainly comes from the investment returns of money market funds, such as bank deposits and bonds. Yu’e Bao is renowned for its high liquidity, low threshold, and a yield rate higher than bank current deposits, once highly favored but now gradually losing its luster.
According to official data, Tianhong Fund has a registered capital of 514.3 million yuan, with major shareholders including Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (51%), Tianjin Trust Co., Ltd. (16.8%), and Inner Mongolia Junzheng Energy Chemical Group Co., Ltd. (15.6%).
Established in November 2004, Tianhong Fund is one of the national public fund management companies approved by the China Securities Regulatory Commission. Although established early, the company was not prominent in the industry during the initial period and mostly operated at a loss.