Pushing open the exquisite wooden door of the VIP room and stepping onto the thick carpet, the investment process and targets of high-end wealth management are not the usual patterns familiar to ordinary investors.
They typically face private equity products with high thresholds, which may come with flashy terms like &#34;global allocation,&#34; &#34;steady growth,&#34; and &#34;top-notch risk control,&#34; along with the distinction of being &#34;exclusive.&#34; Such products have, to some extent, &#34;supported&#34; the counters and sales volumes of many high-end wealth management sales institutions in China.
But can every product be fully understood by investors? Faced with increasingly complex investment solutions that often break through geographical and asset conventional boundaries, do high-end clients with over 1 million in monetary assets also experience confusion and ignorance?
All financial products inevitably come with complex terms, which serve as a protection of interests for both investors and managers, while also constructing a &#34;professional high wall&#34; of understanding. In this process, non-professional investors often face more challenges.
When a high-end wealth management product does not adopt the usual excess performance fee model and even explicitly states &#34;no performance fees,&#34; will such a product be more popular, or will it evoke more &#34;incredible&#34; exclamations?
Everything depends on the scrutiny of details and the careful examination of the product plan······
<h2>&#34;Not Simple&#34; Private Equity High-End Products</h2>
Recently, a wealth management product launched by a leading brokerage in the private equity market has attracted considerable attention.
According to relevant announcements, this product has attracted subscriptions from at least 38 institutional investors and 55 individual investors—this is a typical high-net-worth fundraising method in the private equity industry, and it has garnered significant attention.
Why has it attracted so much professional interest?
<h2>Ace Channel + Global Institutional Sub-Strategies</h2>
This type of product is typically called QDII-FOF.
Specifically, it is managed by a top-tier high-end wealth management institution (usually a well-known brokerage) that invests client funds through FOF into QDII public or private products.
Taking the aforementioned Zhongjin XX Smart Selection No. 1 QDII-FOF Collective Asset Management Plan (hereinafter referred to as &#34;QDII-FOF&#34;) as an example, the institution plans to invest client funds into a diverse and dispersed range of products, with examples in its materials even including well-known asset management products from overseas asset management institutions.
Specifically, this includes: a market-neutral product from a global index giant, a long-short equity strategy product from a top hedge institution, and an alternative arbitrage strategy from a well-known investment institution, or a well-known &#34;all-weather&#34; investment strategy from a large overseas investment institution, etc.
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<h2>Even More Complex &#34;Threshold&#34; and &#34;Fee Rate&#34;</h2>
In addition, this type of product has the following characteristics:
<blockquote>
First, this is a private equity product aimed at high-net-worth clients, with a minimum investment threshold of 1 million RMB, which is currently one of the highest investment thresholds for private equity products.
Secondly, this product is positioned as an absolute return-oriented product, striving to provide investors with diversified and low-correlated sources of income.
Thirdly, the fee structure of the aforementioned product is particularly &#34;favorable,&#34; clearly stating that this QDII-FOF does not charge performance fees or exit fees.
</blockquote>
This is quite rare within the high-end wealth management product system.
<h2>&#34;Dissecting&#34; the Investment Scope of the Product</h2>
Upon closer inspection, the product brochure is indeed crafted with a high threshold.
Taking the aforementioned QDII-FOF as an example, the investment scope of this product is very broad, and the FOF manager has considerable &#34;operational adjustment&#34; space:
According to the terms in the contract, it includes at least:
<blockquote>
Domestic assets: bank demand deposits, government bonds, central bank bills, government financial bonds, local government bonds, money market funds
Overseas assets: negotiable certificates of deposit, government bonds, money market funds; public funds registered with the securities regulatory authorities of countries or regions that have signed bilateral regulatory cooperation memorandums with the China Securities Regulatory Commission (including open-end funds and exchange-traded funds ETFs)
If laws, regulations, or regulatory authorities later allow collective plans to invest in other varieties, the manager may include them in the investment scope of this collective plan after following appropriate procedures.
</blockquote>
From the description, this is a typical list of stable global asset allocation. However, it is noteworthy that it not only opens up monetary and fixed-income instruments but also mentions overseas public funds (with conditions) and money market funds. Additionally, there is a &#34;bottom-line scope&#34;—
At least from the description, this product primarily achieves overseas investment through subscriptions to overseas public funds.
<h2>&#34;Bridging&#34; to Overseas Investments</h2>
Typically, high-quality private fund managers often achieve global allocation by directly investing in overseas stocks, bonds, and other assets, directly seizing global market opportunities.
However, due to the differentiation from public QDII products, such products usually invest in overseas private funds through certain channels.
In fact, overseas public funds, due to their high liquidity and wide popularity, can also be investment tools for some investors. However, in the private fund sales field, ultimately investing in overseas assets through public funds seems somewhat &#34;compromised.&#34;
This design raises the question: why does a private fund product, which should seek breakthroughs in flexibility and high returns, ultimately choose to achieve overseas investment through the traditional &#34;stable tool&#34; of public funds?
<h2>Fees Changed &#34;Costumes&#34;?</h2>
When a leading brokerage acts as both the manager and the seller, the product design choices are often very meticulous.
In the conventional design of private asset management products, performance fees are the core mechanism for managers to share excess returns, typically &#34;taking 20% of the portion exceeding the performance benchmark.&#34;
This arrangement serves as both an incentive for investment capability and an important benchmark for investors to measure the cost-effectiveness of the product.
The biggest highlight of the aforementioned QDII-FOF is that it completely cancels the clause for excess performance commissions, with the contract clearly stating: &#34;This plan has no performance fee arrangement.&#34;
Thus, the fees involved in the described product are merely: a subscription fee of 1%, an annual management fee of 1.5%, and custody fees, with no exit fees charged to investors
This may be related to the fact that it ultimately targets public funds. Because, whether overseas or domestically, public products rarely extract excess performance fees.
<h2>&#34;Butcher's Knife&#34; Composite Fee Structure</h2>
However, behind this design lies another more complex fee structure that deserves further analysis.
The contract clearly states: &#34;This plan does not charge performance fees.&#34; This statement can easily be extended to imply that the product itself does not have performance fees, but in fact, the subject is &#34;this plan.&#34; In other words, at the &#34;outermost&#34; level of the asset management plan, there are no performance fees.
However, a segment of the product contract that follows is easily overlooked: &#34;As one of the fund share holders of the overseas fund, this fund shall also bear the relevant fees of the overseas fund.&#34;
Behind this sentence lies key information.
Let’s make an assumption: when a broker-dealer QDII-FOF uses funds to subscribe to an actively managed public fund in the United States, the management fee for that fund is 1.2%, and the subscription fee is 0.5%.
However, this 1.7% fee will not appear on the fee list of the CICC QDII-FOF but will be directly deducted from the fund's net asset value, ultimately borne by the investors.
In other words, the &#34;performance fee&#34; that traditionally exists in private equity funds has disappeared, but both the outer layer and the underlying products will charge their own management fee rates.
This &#34;hidden fee rate&#34; typically appears in such &#34;nested structures.&#34;
In addition, the contract also mentions: &#34;During the operation of the collective plan, handling fees, custody fees, transfer fees, stamp duties, subscription fees, redemption fees, commissions, and other related taxes incurred from investments will be directly deducted based on the actual amounts incurred.&#34;
This wording should not be overlooked: because sometimes, in certain markets and platforms, trading fees are not cheap.
<h2>Broker-Dealers as &#34;Operators&#34;</h2>
As the operator of this product, the relevant broker-dealer is undoubtedly a key player.
The broker-dealer is not only the manager of the aforementioned product but also one of the sales parties. This integrated structure allows it to maintain higher flexibility and stability in the flow and management of funds.
In other words, CICC is responsible for investment decisions, fundraising, and customer service.
Against the backdrop of broker-dealers increasingly focusing on the transformation of &#34;buy-side investment advisory,&#34; such products have become a key tool for competing for high-net-worth clients.
<h2>Fee Transparency is the Trend</h2>
Through the above analysis, we can see that although the aforementioned QDII-FOF appears to have no performance fees, in reality, through a series of complex investment strategies, investors still inevitably need to pay a portion of fees. These fees can easily be overlooked beforehand due to the complex structure and are difficult to verify afterward.
This design makes the fees less transparent. Investors see &#34;no performance fees&#34; and often mistakenly believe this means lower total costs, ignoring the multiple hidden fee rates that may be included in the underlying funds.
If such products target overseas hedge funds, investors may also unknowingly pay performance fees to overseas fund managers.
Because the fees of the nested sub-products do not disappear; they are embedded in the structure and manifest as impacts on the net value
Therefore, when evaluating this product, investors need to pay attention not only to its investment direction and fee structure but also to understand how these &#34;hidden charges&#34; subtly affect its long-term returns

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