The semi-annual report of E Fund NASDAQ 100 ETF Connect Fund shows that a local state-owned institution has become the largest on-exchange shareholder of the fund and has held it continuously for four years since the end of June 2020. The on-exchange price of the fund has increased by as much as 99% in the past four years. However, Tsinghua University, which also participated with the local state-owned institution, missed out on doubling its return by exiting too early.

It is worth noting that although the performance of the above-mentioned ETF Connect funds is excellent, the net management fee disclosed by the relevant fund rarely shows a negative value. It is reported that the net management fee is negative because the ETF Connect funds do not charge investors for the portion of the assets that are invested in ETFs. However, due to the faster decline in the management fee income of the relevant products than the decline in the customer maintenance fee that should be paid, the net management fee appears to be in deficit.

Local state-owned assets buy US stock ETFs on-exchange

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

Changzhou Investment Group Co., Ltd. had already laid out its position in E Fund NASDAQ 100 ETF Connect Fund through on-exchange 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 share proportion of 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 was also once a shareholder of E Fund NASDAQ 100 ETF Connect Fund. At the end of June 2020, Tsinghua University held 4.2 million shares of E Fund NASDAQ 100 ETF Connect Fund, accounting for 4.2% of the total listed shares of the fund.

As of now, the total size of E Fund NASDAQ 100 ETF Connect Fund is 0.836 billion yuan, with a total of 0.0426 million account holders. Individual investors account for nearly 97% of the total number of holders. The year-to-date return of the fund is 14.7%, the return for the past two years is 56.76%, and the return since June 2020 is approximately 84.2%.

However, the profits from holding fund shares on the exchange are greater under the condition of premium. Since June 30, 2020, the on-exchange listing price of the E Fund Nasdaq 100 ETF has increased by about 99%, significantly outperforming the 84.2% net asset growth rate of the fund during the same period. This characteristic of on-exchange arbitrage has also led to a situation where institutional investors dominate on-exchange trading after many ETF funds are listed.

Despite the fact that the US stock market reached new highs in the first half of the year, the excellent performance of the E Fund Nasdaq 100 ETF is accompanied by a disclosed negative net management fee.

It is worth mentioning that, despite the new highs in the US stock market in the first half of the year, the E Fund Nasdaq 100 ETF, which has performed well, has a disclosed negative net management fee.

According to the information disclosed by the E Fund Nasdaq 100 ETF, the management fee receivable by the fund in the first half of 2024 is 161,617.75 yuan. Among the aforementioned management fees, the customer maintenance fee payable to the sales institution is 553,640.76 yuan. Therefore, the net management fee collected by the E Fund Nasdaq 100 ETF in the first half of 2024 is a loss of 392,023.01 yuan.

Compared to the same period last year, the management fee income collected by the E Fund Nasdaq 100 ETF was 3,388,814.39 yuan, of which the customer maintenance fee payable to the sales institution was as high as 980,815.71 yuan. In the end, the net management fee income collected by the fund during the same period last year was 2,407,998.68 yuan.

It is reported that the remuneration of the manager of the above-mentioned ETF-linked fund is calculated at an annual rate of 0.50% based on the net asset value of the fund after deducting the net asset value of the target ETF share. Due to the special nature of ETF-linked funds and other types of funds, fund companies cannot charge management fees for the portion of the fund's assets that they themselves manage. However, the collection standards for customer maintenance fees are not adjusted, resulting in negative net management fees.

It is worth mentioning that this year, the net management fee income of several ETF-linked funds has turned negative. Industry insiders believe that this situation is related to the faster decline in management fees of ETF-linked funds compared to customer maintenance fees. For example, the management fee income of the E Fund Nasdaq 100 ETF 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%, resulting in a loss in the net management fee income.

There is still room for the US stock market in the second half of the year.

In terms of the US stock market, Wu Chendong of E Fund Dana Nasdaq 100 ETF Linked Fund believes that the US economy will continue to expand steadily this year, with strong growth in employment and consumer price index, and while 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 meeting of pausing rate hikes. Federal Reserve Chairman Powell acknowledged the progress on inflation, but also emphasized the need for more data to boost confidence in rate cuts by the Fed. Influenced by inflation data, Federal Reserve officials generally revised their expectations for rate cuts in 2024 from 3 times at the beginning of the year to 1 time, showing continued indecision in the Fed's interest rate policy path.

In terms of index performance, the Nasdaq 100 index consists mostly of growth companies, which are more sensitive to monetary policies and corporate profits. The outstanding performance and profitability of leading technology companies, combined with the market's enthusiasm for the rapid development of artificial intelligence, have driven a comprehensive rise in the US stock market, particularly in the information technology sector, with the Nasdaq 100 index significantly increasing during the reporting period, outperforming the S&P 500 index.

Regarding the investment strategy for the second half of this year, Wu Chendong believes that the repeated fluctuations in US inflation data may disturb market expectations for Fed rate cuts, and to a certain extent, the outcome of the US election in November will also affect the market sentiment for US stocks. In the short term, the market will continue to focus on US inflation levels and the development of Fed monetary policies, with the volatility of technology growth companies possibly 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 markets and a crucial module for US household wealth management and overseas investors' global asset allocation.

The rapid development of new technologies such as artificial intelligence and the growing digital demand will bring new opportunities and development space for technology growth companies. The Nasdaq 100 index is a representative index of US technology growth companies in the US stock market, with most of its constituent companies being global industry leaders. 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-based stock indices in the US. In today's thriving trend of global index investments, Nasdaq 100 index products will continue to be essential tools for sharing investment opportunities in the US technology and internet industries.

Editor/Lambor