China funds slash ETF fees, escalating price war in booming market

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Exchange-traded funds have boomed this year as fund companies compete fiercely to lure investors disillusioned by poorly performing active fund managers.

SHANGHAI/HONG KONG – Major Chinese fund companies announced a big reduction in fees for a batch of equity exchange-traded funds on Wednesday, intensifying price competition in the rapidly expanding $400 billion sector of the market. The move to cut management and custodian fees by as much as 70% came a day after Wu Qing, China's chief securities regulator, pledged to encourage index investment and fund industry fee reform.

The boom was partly aided by state funds piling into a struggling market early in the year, and by a flurry of government stimulus measures for the ailing economy in recent month. The fee cuts will benefit sovereign fund Central Huijin, which holds more than $100 billion worth of ETFs. Cut-throat competition for market share also helped drive down fees and attract inflows.

 

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