Research On Chinese Open-end Securities Investment Fund Management Fees

The fee rate in open-end funds with fixed ratio is extracted according to the net value of the fund, this structure is onefold, lack of elastic extraction in such a way that the fund management company management outstanding achievement or service level regardless of how be quite different, but still the same management fees charged. It is not only irresponsible for the investors, similarly to fund management companies with good performance and excellent management are also extremely unfair. It will lead to the investor does not recognize the merits of fund management company, and fund management companies are lack of good competition mechanism and incentive mechanism, which is not conducive to the fund management company’s survival of the fittest, also does not favor the open-end fund market sustainable development.In view of this situation, the article puts forward a kind to use American option pricing calculation and performance of optimal management fee rate method using binomial tree pricing model from the option theory. In this paper, the author mainly researches management rates in the minimum rate of return under the target and the upper yield target constraints. Fund managers making a minimum commitment that investors require a minimum target rate of return seem as an American put option, depending on the minimum rate of return target using binomial tree pricing model to calculate the price of options, and thus obtained in different minimum rate of return under the target of management fee. Then considering the fairness and better incentive fund managers, fund managers require investors to delineate a highest income goal, when the fund income is higher than the highest earnings target fund managers get the highest profit target on interest, this highest earnings target seem as an American call option, similarly to the use of binomial tree pricing model the highest yield under different target option price, the put option is subtracted from the call option value is on the lower limit of yield target constraints management fee rate. Comparison of the two different management fee rate form, and not be redeemed B-S calculated management fee, we can discover the fee through the analysis on the basis of American option, using a binary tree model to calculate the limit yield target constraints management fee rate for the requirements of the optimal management fee.