Investors Lost ¥1.45 Trillion. The Fees Kept Coming.

In January 2021, a new Chinese mutual fund raised RMB 7.921 billion. The manager’s name was the headline. The fee schedule was the footnote.

Five and a half years later, the fund’s Class A units had lost 48.64% since inception. By the end of June 2026, assets had fallen to about RMB 1.281 billion. The decline in assets also reflected redemptions, so it is not a measure of investment loss by itself.

One part of the arrangement had remained steady: the management fee.

The fee starts before the story does

At launch, the annual management fee was 1.5%. Applied to the initial RMB 7.921 billion, that is roughly RMB 325,500 a day. This is an illustration of scale, not a reconstruction of the fund’s first-day charge.

The fund’s rules calculate the fee from the previous day’s net assets, accrue it daily, and pay it monthly. The fee does not wait for a profitable trade, a rising net asset value, or a successful year.

In August 2023, the rate was reduced to 1.2%. A lower rate changes the size of the charge. It does not change the condition that creates it: the fund manages assets, and the contract charges for that management.

How a market turns a manager into a star

In 2019 and 2020, Chinese shares rallied, especially in consumer and technology sectors. Managers who held the winning sectors produced striking return charts.

For an investor looking at an app, it is difficult to separate skill from a rising market. A 50% gain can look like proof of talent even when the market supplied much of the lift.

Marketing rarely puts that uncertainty in the headline. Star managers appear on covers and programs. Followers gather online. New fund subscriptions feel like a queue for a sold-out concert.

The causal story quietly reverses itself. A rising market produces strong returns; strong returns become evidence of exceptional skill; the reputation attracts more assets; the assets generate more management fees.

The name brings in the money. The fee schedule begins collecting from it.

The number that looks small

By July 30, 2026, the fund’s Class A units were reported to have lost 48.64% since inception, trailing their benchmark by more than 40 percentage points. Through the end of 2025, reported cumulative investor losses exceeded RMB 2.9 billion, while management fees exceeded RMB 200 million.

Those dates and measures matter. Investor returns, total fund profit, assets under management, and fee revenue are different numbers. A fund’s assets can shrink because investors redeem; a unit class can lose value; and a management fee can still accrue on the assets that remain.

In 2022, annual-report totals put losses across China’s public mutual funds at RMB 1.45 trillion. Spread across roughly 1.4 billion people, that is about RMB 1,000 per person as a way to picture the scale. It does not mean every person owned a fund or paid that amount.

The same year, management, custody, trading, and sales-service fees across the industry were reported at RMB 214.6 billion, a record. The parties receiving those four categories are not all the fund company, and expense totals are not the same as profit.

Another RMB 434.8 billion in losses followed in 2023. A negative investment return does not automatically turn a fixed management fee into a refund.

Rules begin to catch up

China’s securities regulator published an action plan in May 2025 that called for performance-linked management fees. Its target concerned new actively managed equity funds issued by leading firms over the following year: at least 60% were to use the performance-linked model.

Formal compensation rules published in April 2026 went further. Fund managers must invest at least 40% of their annual performance pay in funds they manage. A reduction of at least 30% applies when the relevant three-year performance trails its benchmark by more than 10 percentage points and the fund’s profit rate is negative.

These reforms address how managers share the outcome. They do not rewrite older fee contracts overnight.

The ledger question

The important question is not whether a 1.2% fee sounds large. It is what the fee is charged for, and who carries the downside when the investment disappoints.

If the fee is based on assets under management, it is a cost of the product. It is deducted inside the fund, so you do not receive a separate bill. You see its effect through the value of your units.

That is why a personal ledger helps even when you are investing through a regulated product. Record the amount invested, the ongoing fee, and the return over the same period. Keep the dates and denominators beside the figures. A headline about a star manager is a story; the fee line is a contract.

The fund began charging before investors knew how the story would end. The market made a star, the name attracted the money, and the fee kept accruing while the units fell.

Your return is the number left after that mechanism has run.