Returns decline, fee rates jump, scale increases—where is the aroma of money market funds "hovering around the 1% edge"?

Your Yu’e Bao balance is almost unable to hold 1%

“Previously, putting money into Yu’e Bao, I could earn enough for a cup of milk tea every day. Now, the returns are getting smaller and smaller, and the fee rates are starting to ‘fluctuate wildly’.” This complaint from Xiao Xia, a 90s white-collar worker from Shenzhen, reflects the feelings of many current money market fund investors.

Recently, as the 7-day annualized yield of money market funds continues to fluctuate downward, a hidden “automatic adjustment” clause in the fund contract has been triggered repeatedly. Several funds have had their management fees temporarily reduced after hitting the agreed thresholds due to returns, then restored when returns slightly rebounded. Some products even cycle between “fee reduction one day, fee restoration the next.”

Over a longer period, such “fluctuating fee rates” have become common. Even as the 7-day annualized yield approaches the “1% mark,” over a hundred money funds have fallen below 1%. However, their total scale has defied the trend and surpassed 15.27 trillion yuan, reaching a new record high. As the appeal of “baby-type” financial products diminishes, why are funds not withdrawing but instead flowing in?

The “rollercoaster” of money fund fee rates is accelerating

On March 11, Anxin Fund announced that its Anxin Tianli Bao Money Market Fund had reduced fees due to a contract clause, lowering management fees from 0.9% to 0.3% starting March 9. On the same day, several other money funds, including Changsheng Yuan Zengli, GF Cash Increment, and Shenwan Lingxin Tian Tianli, also announced similar fee reductions.

According to the announcements, these fee adjustments were not voluntary concessions by public fund managers but were executed strictly according to the “dynamic adjustment mechanism” stipulated in the fund contracts. For example, in the case of Anxin Tianli Bao Money Market Fund, when the estimated 7-day annualized return calculated with a 0.9% management fee is less than or equal to twice the current deposit rate, the fund manager will reduce the management fee to 0.3% to lower the estimated net return per 10,000 units and prevent overdrawing by sales agencies. The fee will be restored once the risk is eliminated.

For instance, Guangda Sunshine Cash Bao announced that due to the above situation on March 10, it adjusted the management fee to 0.25%. Just one day later, on March 11, the fee was restored to 0.9% after the risk was eliminated. Historical announcements show that such “fee reduction, recovery, and re-reduction” cycles have occurred multiple times.

First Financial notes that such “automatic adjustment” cases are not rare. According to incomplete statistics, as of March 11, more than 270 announcements about fee adjustments for money market funds have been made this year, with 42 just since the beginning of the month. Products like CITIC Jianqun Huijin and Penghua Cash Increment have also experienced similar dynamic fee adjustments.

Further analysis shows that most of these adjustments are concentrated in funds transformed from asset management collective products, which generally have floating fee rules and relatively high management fees. For example, on March 10, products like Zhongtai Jinqian Huijin, CICC Jujinli, and Shenwan Lingxin Tian Tianli maintained management fees at 0.9%.

A person from a public fund product department with similar products said to First Financial, “Most of these products are ‘legacy’ products, previously serving brokerage clients and not fully aligned with the current mainstream fee levels of public money funds. Although their current performance suggests that continuing with the original fee structure is not very reasonable, there are no plans to actively adjust in the short term.”

In fact, the frequent triggering of the dynamic fee mechanism reflects the ongoing low yields of money market funds. Wind data shows that as of March 11, among 948 money funds with available data, the average 7-day annualized yield dropped below 1.2%, down 0.22 percentage points from 1.416% a year ago. Compared to the same period in 2024 at 1.98%, the decline is even more significant.

Looking at specific products, only Yinhua Shuangxi Zengli’s 7-day annualized yield exceeds 2%, reaching 2.092%. Last year, seven funds exceeded 2%, with the highest reaching 3.53%. Alarmingly, 113 funds now have a 7-day annualized yield below 1%, more than doubling the 35 funds from the same period last year.

As the largest domestic money fund, Tianhong Yu’e Bao’s yield performance has attracted attention. Its latest 7-day annualized yield has fallen to 1.001%, just a step away from dropping below 1%. Wind data shows that at the end of last year, Tianhong Yu’e Bao’s fund size exceeded 764.6 billion yuan, with its highest-ever 7-day annualized yield reaching 6.763%.

Why funds are not “moving” despite low yields

Despite the declining yields, the total scale of money market funds has continued to grow, reaching a new high. According to the China Securities Investment Fund Industry Association, as of the end of January, the total scale of money funds exceeded 15.27 trillion yuan, accounting for 40.44% of the total market. In just one month, the scale increased by 2,379.05 billion yuan.

In terms of investor structure and growth, the top ten money funds by annual scale increase last year (including different share classes) contributed a total of 583 billion yuan, about 35.5% of the total growth of money funds that year. Data from their mid-year reports show that eight of these funds have over 90% individual investors, highlighting the preference of retail investors for money funds.

With the “breaking below 1%” threshold and fee adjustments becoming routine, why hasn’t there been a large-scale “migration” of funds?

Industry insiders believe that under the combined effects of declining interest rates and the maturity of fixed-term deposits, household asset allocation is undergoing a historic shift. In this context, cash management tools continue to be valuable. “These products, with their high liquidity and low volatility, have become important vehicles for short-term fund management,” said a public fund analyst in South China.

“From market practice, money market funds and similar cash management tools are currently a key way for ‘deposit migration’.” He believes that for funds requiring both “easy access” and relatively stable net asset values, money market funds remain the main vehicle.

He further explained that money market funds serve as a core allocation choice for conservative investors and an important tool for institutional liquidity management. They help investors maintain flexibility while earning returns higher than current deposits, and provide optimized management for daily expenses and emergency funds.

A senior executive from a leading fund company shared a similar view. He told the reporter that although yields are declining and the advantage over bank savings is weakening, the core attributes of money funds as cash management tools have not fundamentally changed. Therefore, future growth may slow but will likely remain at a low level.

“Whether individual or institutional, liquidity management needs will persist. Money funds still have value,” said a fixed income fund manager. “Funds linked with payment functions on internet platforms or with broker margin functions have specific application scenarios. Their high liquidity and low yield volatility remain attractive to individual investors.”

Regarding whether money fund yields will continue to fall, industry consensus is cautious.

“In response to market changes, fund companies can only optimize investment operations—by extending durations, adjusting asset structures, and maintaining compliance and liquidity—to try to boost returns,” said a fund channel professional in Shanghai. “Fund companies need to deepen their market-based strategies to enhance user stickiness and fund retention; if clients demand higher yields, they might recommend short-term bond funds or industry deposit index funds with more attractive returns.”

“Implementing purchase restrictions, dynamic fee reductions, and product innovation are all strategies fund companies use to cope with declining yields,” added the senior executive. “On one hand, they can shorten durations, reduce bond holdings, increase deposits, and flexibly use leverage and repo assets to boost returns; on the other hand, they can create combined products with short-term bonds, maintaining liquidity advantages while exploring yield enhancement.”