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The A-share market in 2024 has undergone a significant journey, characterized by an initial decline followed by a resurgenceThis rollercoaster ride has seen major stock indices mark an upward trend, drawing favorable reactions from the investment communityAccording to data from Wind, approximately 70% of actively managed equity funds have posted positive returns during this periodHowever, amidst this broader market victory, a notable player has found itself in murky waters: E Fund Management Co., Ltd., a titan in the Chinese mutual fund industry, has been experiencing considerable challenges.
On January 21, a deeper investigation into E Fund's performance revealed stark statisticsBetween January 1, 2024, and January 20, 2025, a comprehensive analysis showed that 95 of E Fund's offerings registered negative growth rates in their net asset valuesMoreover, when extending the analysis over a three-year span—from January 1, 2022, to January 1, 2025—210 funds under E Fund's management similarly experienced negative net asset value growthThis trend paints a vivid picture of the challenges facing the fund management house, hinting at a deterioration of investor value.
Growth under pressure, net profit consistently declining
Established on April 17, 2001, with a modest registered capital of 132 million yuan, E Fund became a prominent force in the mutual fund industryBy 2015, it had reached a significant milestone, becoming the top firm in terms of non-monetary public funds under management, a title it held onto for consecutive yearsAs of January 21, data from Wind showed that E Fund managed no fewer than 420 products, boasting an impressive total management scale of 1.95 trillion yuanDespite this enormous presence, E Fund faced the twin pressures of market volatility and reforms in fee structures, resulting in a mere 14% growth in asset management scale over four yearsIn contrast, the firm's total public fund management scale surged to over 1.7 trillion yuan in 2021, marking a substantial 39.28% increase from the end of 2020.
Within E Fund’s extensive product portfolio, equity funds dominate with 166 offerings, followed by 119 mixed funds, and 66 fixed-income funds
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Yet, the risk distribution in these categories is rather skewed; there is a greater abundance of medium to high-risk (R4) and medium-risk (R3) products, while low-risk (R1) and high-risk (R5) funds remain relatively scarce.
Unfortunately, E Fund's financial performance in recent years has been less than stellarRevenue figures have plummeted from 14.557 billion yuan in 2021 to 13.915 billion yuan in 2022. Projections indicated a further dip to 12.501 billion yuan in 2023, with the first half of 2024 recording revenues of just 5.374 billion yuan.
Consequently, net profits have also seen a downward spiral, with figures reaching 3.837 billion yuan in 2022, dropping to 3.382 billion yuan in 2023, and tumbling to 1.516 billion yuan in the first half of 2024. The rates of change in profits reflect a precarious brink, with declines of 15.38%, 11.86%, and 6.27%, respectivelyThe root causes of this downturn trace back to market fluctuations paired with the implications of the public fund fee structure reform implemented beginning July 2023—this reform directly affected income streams for fund management companies.
The leadership at E Fund, including Chairman Zhan Yuyin and Co-Chairwoman Liu Xiaoyan, is now tasked with devising strategies to pivot back to growth after enduring this challenging market landscape.
One aspect worth noting is that E Fund accrues nearly 10 billion yuan through management fees alone on an annual basisA closer inspection of E Fund's expense management reveals that in 2022 and 2023, the company spent 10.151 billion yuan and 9.275 billion yuan, respectively, on management feesSimilarly, custodial fees accounted for 2.189 billion yuan in 2022 and 1.991 billion yuan in 2023, while client maintenance fees stood at 2.858 billion yuan and 2.656 billion yuan for the same periodSales service fees varied, registering 1.014 billion in 2022 and climbing to 1.3 billion yuan in 2023.
Equity funds suffer heavy losses; “Three Mao” funds devastate investors
In light of E Fund's tumultuous trajectory, data indicates that several equity funds have been consistently underperforming since their inception
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One particularly notorious case is the E Fund CSI Medical ETF, which has gained the unfavorable nickname “Three Mao Fund” – a term generally used in China to denote investment products that have significantly tanked in valueAs of January 21, the unit net value of this fund stood at just 0.3631, with fund manager Zhang Zhan at the helmNotably, this investment vehicle has sustained a 44.88% loss over the past three years, situating it at a dismal rank of 1305 out of 1365 in its category.
Examining recent performances reveals that the E Fund Medical Biology C, managed by fund managers Yang Zhenshao and Xu Zheng, recorded the steepest three-month decline at 15.33%. As of January 21, its unit net value was pegged at 0.5646, resulting in a nearly flat six-month return of -2.97%, with a ranking of 904 out of 976 in similar funds.
The situation doesn't seem to improve, as out of the 26 new funds launched by E Fund since October 2024, including both A and C categories, only six have managed to produce positive returns, with the remaining twenty failing to deliver any gainsThis inadequate performance not only jeopardizes investors' returns but also raises critical questions regarding the firm’s management capabilities.
Amid these erratic market conditions, some funds under E Fund's management have yielded unsatisfactory resultsAccording to Wind, the company's index results from October 23, 2024, to January 21, 2025, showed a return of -2.6855%, underscoring the firm’s vulnerability to market fluctuations.
Once embroiled in “Five Sins” controversy, the firm must reinforce compliance
In terms of compliance, E Fund has also faced significant hurdles in recent yearsIn March 2023, the Guangdong regulatory bureau issued a warning letter to E Fund due to issues linked to internal control and complianceThis incident illuminated the underlying deficiencies within the company regarding governance and compliance management.
Moreover, in September 2024, an anonymous letter sent shockwaves throughout the industry
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