Local state-owned assets bought US stock ETFs in the domestic market, making a huge profit of 99% in four years

Behind the hot trend of thematic funds in the US stock market, local state-owned assets are also emerging.

The semi-annual report disclosed by E Fund NASDAQ 100 ETF Linked Fund shows that a local state-owned institution has become the largest onshore shareholder of the fund, holding continuously for four years since the end of June 2020. The onshore price of the fund has surged by as much as 99% in the past four years, while Tsinghua University, which also participated in the layout with local state-owned assets, missed out on doubling its returns by exiting too early.

It is worth noting that although the performance of the above-mentioned ETF linked fund is excellent, the net management fee disclosed by the related fund has rarely shown a negative value. It is reported that the linked fund does not repeatedly charge investors for the portion of assets invested in ETFs, but due to the rapid decline in management fee income compared to the decline in customer maintenance fees that should be paid, the net management fee has incurred losses.

Local State-Owned Assets Buying US Stock ETFs Onshore

On August 30, E Fund NASDAQ 100 ETF Linked Fund released its interim report, in which the fund disclosed the list of the top ten onshore shareholders. Among them, Changzhou Investment Group Co., Ltd. held a proportion of the fund shares accounting for 5.92% of the total listed shares, making it the largest onshore shareholder of the fund in terms of total listed shares. Currently, the market value held is 10.8198 million yuan. Changzhou Investment Group Co., Ltd. is a local state-owned asset held by the Changzhou local government.

Changzhou Investment Group Co., Ltd. had already laid out the E Fund NASDAQ 100 ETF Linked Fund through onshore purchases as early as the end of June 2020. According to a report released by E Fund in 2020, Changzhou Investment Group Co., Ltd. held a proportion of shares accounting for 1.85% of the total listed shares at that time, and since then, it has continuously increased its holdings of the fund.

It is worth mentioning that Tsinghua University had also been a shareholder of the E Fund NASDAQ 100 ETF Linked Fund. By the end of June 2020, Tsinghua University held 4.2 million shares of the E Fund NASDAQ 100 ETF Linked Fund, accounting for 4.2% of the total listed shares of the fund.

As of now, the total scale of the E Fund NASDAQ 100 ETF Linked Fund is 836 million yuan, with a total of 42,600 fund holders, of which nearly 97% are individual investors. The fund has achieved a year-to-date return of 14.7% this year, a return of 56.76% in the past two years, and a return of approximately 84.2% since June 2020.

However, the profit from holding fund shares onshore in a premium situation is even greater. From June 30, 2020, to the present, the onshore listed price of the E Fund NASDAQ 100 ETF Linked Fund has increased by approximately 99%, significantly outperforming the 84.2% net asset value growth rate of the fund during the same period. This characteristic of onshore arbitrage also leads to a situation where institutional investors dominate the onshore trading of many ETF funds after they are listed

Strong Performance but Negative Net Management Fee

It is worth noting that despite the record high in the U.S. stock market in the first half of the year, the outstanding performance of the E Fund Nasdaq 100 ETF Linked Fund revealed a negative net management fee.

Information disclosed by the E Fund Nasdaq 100 ETF Linked Fund shows that the fund should have collected a management fee of 161,617.75 yuan in the first half of 2024. Within this management fee, the customer maintenance fee payable to the sales agency amounted to 553,640.76 yuan. Therefore, the net management fee collected by the E Fund Nasdaq 100 ETF Linked Fund in the first half of 2024 was a loss of 392,023.01 yuan.

In comparison to the same period last year, the management fee income collected by the E Fund Nasdaq 100 ETF Linked Fund was 3,388,814.39 yuan, with the customer maintenance fee payable to the sales agency reaching as high as 980,815.71 yuan. Consequently, the net management fee income collected by the fund in the same period last year was 2,407,998.68 yuan.

It is reported that the management fee of the aforementioned ETF Linked Fund is calculated at a rate of 0.50% of the previous day's net asset value of the fund deducted from the net asset value corresponding to the target ETF shares in the fund's assets. Due to the unique nature of ETF Linked Funds and similar fund products, fund companies are not allowed to charge management fees for the portion of the fund's assets held in their own managed funds. However, the standard for collecting customer maintenance fees is not reduced, which may result in a negative net management fee.

It is worth mentioning that this year, several ETF Linked Funds have reported negative net management fee income. Industry experts believe that this situation is related to the faster decline in management fees of ETF Linked Funds compared to the decline in customer maintenance fees. For example, the management fee income of the E Fund Nasdaq 100 ETF Linked Fund this year has decreased by as much as 95% compared to the same period last year, while the customer maintenance fee has only decreased by 44%, leading to a loss in the final net management fee income collected.

Still Room for Growth in the U.S. Stock Market in the Second Half of the Year

Regarding the U.S. stock market, Wu Chendong of the E Fund Nasdaq 100 ETF Linked Fund believes that the U.S. economy has maintained steady expansion this year, with strong growth in employment and consumer price index, and although core inflation has slightly declined, it still shows some resilience. The four Federal Reserve interest rate meetings in the first half of 2024 all announced maintaining the federal funds rate target range between 5.25% and 5.50%, marking the seventh consecutive pause in rate hikes. Federal Reserve Chairman Powell acknowledged progress in inflation but also emphasized the need for more data to boost confidence in rate cuts. The dot plot shows that influenced by inflation data, the general expectation of Federal Reserve officials for the number of rate cuts in 2024 has been reduced from 3 times at the beginning of the year to 1 time, and the Federal Reserve remains undecided on the path of interest rate policy.

In terms of index performance, the Nasdaq 100 Index consists mainly of growth-oriented companies, which are more sensitive to monetary policy and corporate earnings. The continued outstanding performance and profitability of leading technology companies, coupled with the market's enthusiasm for the rapid development of artificial intelligence, have driven a comprehensive rise in the U.S. stock market, especially in the information technology sector. The Nasdaq 100 Index saw a significant increase during the reporting period, with returns exceeding those of the S&P 500 Index Regarding the investment strategy for the second half of this year, Wu Chendong believes that the fluctuations in US inflation data may disrupt market expectations of a Fed rate cut. The outcome of the US election in November will also have an impact on the market sentiment to some extent. In the short term, the market will continue to focus on the US inflation levels and the development of the Fed's monetary policy. The volatility of technology growth companies may also be higher than the market average. In the medium to long term, the US stock market is one of the most important components of the global capital market, as well as a crucial module for US household wealth management and overseas investors in global asset allocation.

The rapid development of new technologies such as artificial intelligence and the continuous growth in digital demand will bring new opportunities and development space for technology growth companies. The NASDAQ 100 Index is a representative index of technology growth companies in the US stock market, with most of its constituent companies being global leaders in their respective industries. In the medium to long term, the NASDAQ 100 Index not only consistently outperforms the nominal GDP growth rate of the US, but also significantly outperforms other broad market indices in the US stock market. In the era of growing global index investing, NASDAQ 100 Index products will continue to be an important tool for accessing investment opportunities in the US technology and internet industry.

Source: Securities China Original title "Rare! Local State-Owned Assets Heavyweight in this ETF, Earned 99% in Four Years" Editor: Yang Yucheng Proofreader: Liao Shengchao