Research On Rational Management Fee Of Chinese Open-ended Funds Based On Market Timing Ability

The combined action of over high fixed management fee rate and lower fund earning power can inhibit the enthusiasm of investors to participate in the fund market transactions, and have serious influence on the dynamism of fund market. Therefore, to determine the reasonable management fee rate is very important for fund market. With management fee rate as the basis of calculation of fund managers’pay, it is necessary to connect fund earning power and the performance. And timing ability is an important earning capacity of fund, should be used as a reference to determine the fund management fee rate.The paper uses the principal-agent theory, taking timing items as the fund performance, firstly establishes principal-agent model in ideal conditions, gets the theoretical solution of the optimal management fee rate, demonstrates that the fund management fee is negatively correlated to the fund size and fund type, and timing can help to improve the expected revenue of fund investors. Then, based on the limited ability of current fund managers in China, paper builds principal-agent model in non-ideal conditions, gets the expression of rational fund management fee rate meeting the expected utility maximization of fund managers, finds that fund income is also the important factor influencing the fund management fee rate in addition to the fund size and fund type, the higher the income is, the higher management fee rate should be. Further, based on the analysis of the current situation of fund development in China, paper assigns these three influence factors, gets the reasonable management fee rate that stock funds, mixed funds, bond funds should respectively choose in different scale levels and expected return level, proves that different types of funds management fee should be different, management fee should also be charged for the same type funds but with different levels of expected revenue according to the different levels of management fee rate, and finds that the current management fee rate of our stock funds is slightly above a reasonable level, while mixed funds management fee is too high. In addition, decompose the income of the fund, timing ability is an important profitability of fund and help to raise the level of the fund income. And carries out an empirical research on funds timing by using estimation method of funds timing based on investment portfolio and finds that the market timing ability among funds is different. Based on the positive correlation of the effect of timing ability on fund income and fund income as well as fund management fee rate, the paper argues that according fees should be charged for the funds with different timing ability in accordance with the different management fee rates when other factors remain constant. Finally, based on the above analysis, the paper proposes the policy proposals.