Money market fund yields fall below 1%; management fee discounts become a regular practice

Source: Economic Information Daily Author: Wu Lihua, Xie Dafi

As market interest rates continue to decline, money market funds are experiencing an unprecedented wave of “passive fee reductions.”

Unlike the proactive fee cuts implemented by the industry since 2023, recent announcements from public fund managers such as Changsheng, Shenwan Lingxin, Anxin, and Nord indicate that their money market funds are automatically triggering management fee reductions based on the fund contract’s dynamic adjustment mechanism.

This change signifies a deep transformation in public fund fee reform from “administrative-guided fee reductions” to “market-based contractual constraints,” and also indicates that in a low-interest-rate environment, the industry ecosystem for money market funds will undergo a fundamental restructuring.

Automatic Management Fee Discounts

According to an announcement from Changsheng Fund on February 25, the management fee for Changsheng Yuan Zengli Money Market Fund has been sharply reduced from 0.70% to 0.25% starting February 24, a 64% decrease.

At the same time, Shenwan Lingxin Tian Tian Li Money Market Fund also announced that its management fee was lowered from 0.90% to 0.30%. Anxin Fund and Nord Fund’s money market products also disclosed similar fee reduction notices on the same day, forming a rare wave of concentrated fee cuts.

It is noteworthy that these institutions emphasized in their announcements that the fee reductions are not driven by commercial profit considerations but are strictly in accordance with the “dynamic adjustment mechanism” stipulated in the fund contract. This clause clearly states that when the fund’s seven-day annualized estimated yield, calculated at the original management fee rate, is less than or equal to twice the prevailing savings deposit rate, an automatic protection mechanism will be triggered, and the management fee will be lowered accordingly.

Currently, most large commercial banks’ savings deposit rates are around 0.05%, meaning that when the fund’s seven-day annualized estimated yield falls below 0.1%, the fee adjustment process will automatically activate. In reality, Wind data shows that as of February 25, among 339 money market funds with available data (including different share classes), the average seven-day annualized yield has fallen to 1.08%, just a step away from breaking below 1%. Some smaller funds or those with shorter portfolio durations have already seen their estimated yields reach or even fall below the 0.1% threshold.

In fact, this “automatic” fee reduction phenomenon has been intensively occurring since the beginning of 2026, and this “intelligent adjustment” mode is becoming a standard response for money market funds to the low-interest-rate environment. According to industry statistics, more than 90 fee reduction announcements have been disclosed so far this year, many of which are automatic adjustments stipulated in the contracts. Unlike previous proactive fee cuts, the dynamic adjustment mechanism is bidirectional—when yields rise above the threshold, fees will automatically revert to their original levels.

It is understood that, unlike simple fee competition, the large-scale activation of this dynamic adjustment mechanism involves profound risk control logic. Industry insiders point out that when money market fund yields are extremely low, maintaining the original fee rate could result in a negative estimated net yield per ten thousand units. Under the T+0 rapid redemption mechanism, this could easily lead to settlement overdraft risks for sales agencies.

Specifically, money market funds generally offer “T+0 rapid redemption” services, meaning investors’ redeemed funds are credited on the same day. If the fund’s investment return on that day is negative and the redemption volume is large, the fund company must prepay funds to investors, effectively acting as an advance. If such situations occur on a large scale, it not only increases the fund manager’s financial pressure but also risks triggering a chain reaction of liquidity risks.

“This is not just a price war but the automatic activation of a risk control mechanism,” said a senior executive from a leading fund company. He explained that the dynamic fee mechanism essentially creates a risk buffer among investors, managers, and sales channels. By lowering management fees to ensure the fund’s net return remains positive, it helps prevent liquidity risks from spreading under redemption pressure. Essentially, this is a “circuit breaker” embedded in product design, prioritizing investor interests.

The executive also noted that the introduction and concentrated triggering of the dynamic fee mechanism mark a shift in China’s money market fund industry from a “scale-oriented” extensive development stage to a “risk-return matching” refined management stage. This transition aligns with international practices and demonstrates a responsible approach toward domestic investors. Especially under the current monetary policy of moderate easing and ample market liquidity, with short-term interest rates remaining low, dynamic fee adjustments are likely to become a norm.

Industry Reshaping: From “Scale Focus” to “Quality Focus”

The concentrated activation of the dynamic fee mechanism coincides with a critical period of high-quality development transformation in the public fund industry. Unlike the proactive fee reduction wave guided by regulators in 2023, this “passive” fee reduction demonstrates the self-discipline of market mechanisms and signals a fundamental change in the industry’s fee formation process.

Meanwhile, the dynamic fee mechanism also intensifies industry differentiation. A senior fund manager noted that large fund companies, leveraging their scale and cost control advantages, are more resilient in fee competition, while small and medium-sized firms face greater survival pressures, needing to improve investment performance or offer differentiated services to stay competitive. Although this differentiation is harsh, it benefits the industry by promoting survival of the fittest and improving overall service quality.

It is also worth noting that the current decline in money market fund yields is closely related to the ample liquidity environment. The central bank’s policy of maintaining reasonable liquidity has kept short-term interest rates low. Industry experts generally believe that, in the absence of a clear shift in monetary policy, money market fund yields may remain in the “1% era” for the long term, and dynamic fee adjustments may shift from being occasional to a regular mechanism.

Meanwhile, under the backdrop of rapid growth in passive investment, the role of money market funds as cash management tools is strengthening, and their fee structures are gradually aligning with index products, which is likely an inevitable trend. According to the “ETF Industry Development Report (2026)” published by the Shanghai Stock Exchange, by the end of 2025, the scale of ETFs in China continued to lead Asia, with total assets reaching 5.84 trillion yuan.

For ordinary investors, the reduction in management fees is undoubtedly a short-term benefit. In an environment of declining yields, lower fees can partly offset the impact of falling returns and improve the holding experience. Rough estimates suggest that for a 100,000 yuan investment in a money market fund, reducing the annual management fee from 0.70% to 0.25% could save about 450 yuan annually.

Many industry insiders believe that, from a broader perspective, the activation of the dynamic fee mechanism in money market funds reflects the industry’s commitment to investor-centric development and enhancing investor gains. This mechanism, which prioritizes investor interests over management fee income, demonstrates the industry’s shift from “seller-oriented sales” to “buyer-oriented advisory.” With the implementation of new regulations such as the “Regulations on the Management of Publicly Offered Securities Investment Fund Sales Expenses,” more institutional arrangements to protect investors’ interests are expected to be introduced, pushing the industry toward higher-quality development.