Mini funds face a deadlock in rollover issues; a liquidation mechanism urgently needs to be established

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From: Economic Information Daily

Recently, the meeting of the holders of fund shares for the Bosera Guozheng Large-Cap Growth ETF is still in the tense process of vote counting. This meeting, which was launched on March 26 and will run until voting ends on April 27, will determine whether this product—whose net asset value has been below 50 million yuan for 60 consecutive working days—will continue to operate.

Meanwhile, on March 27, the ZhongTai CSI Interbank Certificate of Deposit AAA Index 7-Day Holding Fund officially entered the liquidation process, becoming the first similar product to be liquidated since interbank CD funds were launched in 2021. This signals that the liquidation scope of “mini funds” has spread from traditional equity and fixed-income categories to innovative products that were once popular.

Data from Wind shows that as of the end of March, there are still 24 interbank CD funds across the market with sizes below 50 million yuan. The triple dilemma of “hard to liquidate, hard to transform, and hard to keep alive” for mini funds has become increasingly prominent.

Industry insiders believe that when liquidation procedures end up stuck in long-term limbo because retail investors are apathetic to voting, the product ecosystem of public fund industry—“focusing on new launches and neglecting continuous operation”—is facing a severe test: how to find a balance between protecting investors’ interests and optimizing the market clearing mechanism has become the mandatory question the industry must answer in its transition from scale expansion to quality improvement.

Liquidation spreads: a survival crisis for innovative products, from traditional categories to innovative ones

On March 27, a single announcement from the asset management company of ZhongTai Securities (Shanghai) officially marked the start of “Year One of liquidation” for the innovative category of interbank CD funds.

According to the announcement, as of March 26, the net asset value of the ZhongTai CSI Interbank Certificate of Deposit AAA Index 7-Day Holding Fund had been below 50 million yuan for 50 consecutive working days, triggering the fund contract termination clause. The liquidation process begins without needing to convene a meeting of fund holders. The fund was established in August 2023, and its initial launch size was 1.3B yuan, but only half a year later the size dropped sharply to 528 million yuan. By the end of the first quarter of 2024, it further shrank to 147 million yuan; by the end of the third quarter of 2025, it left only 22 million yuan, and ultimately it could not escape the fate of liquidation.

“A fund of interbank CD was once seen as the best alternative to money market funds, but in a context of falling interest rates and abundant liquidity, its yield advantage has disappeared, and the redemption pressure through channels has been huge.” A responsible person from a fixed-income product department of a certain fund company analyzed, “This is not only the failure of a single product, but the failure of lifecycle management for the whole category—when the market environment changes, a ‘hit’ product that lacks liquidity arrangements and investor education is very likely to become a ‘mini’ fund’s sacrificial victim.”

This is not an isolated case. On March 24, Bosera Funds’ Bosera Guozheng Large-Cap Growth ETF released an announcement about convening a meeting of fund holders; on March 26 it issued a second indicative announcement, proposing a resolution on continuing operation. This fund has had a net asset value below 50 million yuan for 60 consecutive working days. Under the Measures for the Operation of Publicly Offered Securities Investment Funds, the fund manager shall report to the China Securities Regulatory Commission within 10 working days and propose a solution, and convene a meeting of fund holders within 6 months. The voting period runs from March 26 to April 27, with the vote counting date being April 29. The meeting is still awaiting the holders’ “life-or-death vote.”

Even more absurd is the “keep-alive” ongoing saga of the Yinzhua Electric Power ETF. On March 9, Yinzhua Fund announced it would convene a meeting of holders of the Power ETF by correspondence to review a resolution on continuing operation. This is already the third time within three years that this fund has held a similar meeting: in June 2024, the first amendment was passed with a 100% approval rate; in February 2025, the second meeting was scrapped due to participation rate below 50%; and in March 2026, it once again struggles.

What’s puzzling is that as of March 9, the Yinzhua Electric Power ETF’s year-to-date gain exceeded 14%. The power sector is becoming a mainline in the market, yet the capital chose to exit—about 8 million yuan in net outflows occurred over nearly 20 days. Relevant insiders believe that this divergence of “rising performance and shrinking scale” exposes the “self-fulfilling” trap after a mini fund’s liquidity runs dry: the smaller the scale, the less institutional capital dares to enter; the more institutions withdraw, the greater the redemption pressure from retail investors, and ultimately it falls into a vicious cycle.

A predicament of the mechanism: meetings of fund holders are sidelined and resources are wasted in idle operation

“The core difficulty in liquidating mini funds lies in the rigid constraints of the fund-holder meeting system design and the failure of execution in practice.” A related person from a certain fund company said. According to current regulations, the liquidation or transformation of a fund must be approved by a vote at a meeting of fund holders, and the meeting must meet the requirement that attendance holdings account for more than half of the total holdings on the equity registration date. However, mini funds often have highly dispersed holders with many small accounts; many investors forget their positions or ignore the vote, resulting in the meeting being unable to meet the statutory conditions for convening.

The trading suspension arrangement for Bosera Large-Cap Growth ETF highlights liquidity risk. To protect the interests of fund holders, Bosera Funds has applied to the Shenzhen Stock Exchange for a halt and resumption schedule: the first suspension will be from the start of trading on March 24 until 10:30 a.m.; the second suspension will be from the start of trading on the vote counting date, April 29, until resumption at 10:30 a.m. on the morning the voting results announcement is released.

Relevant insiders say this means that during the long month-long voting period, the fund faces significant liquidity management pressure: if the resolution to continue operating is approved, the fund will keep idling in its mini state; if the resolution fails, it will enter the liquidation process, and holders will face longer-term capital being frozen.

“For a fund company, products with scale below 50 million yuan are not only a ‘negative contribution’ to management-fee revenue, but also a black hole of operating costs.” The aforementioned insider from the fund company calculated: for a mini fund, fixed annual costs for information disclosure, audits, valuation, systems, and so on are about 300k to 500k yuan. If the scale remains below 30 million yuan for a long time, management-fee income will be hard to cover costs, turning into a tangible “zombie asset.” Moreover, large numbers of zombie funds consume regulatory, custody, sales, and other resources, leading to distorted market pricing mechanisms.

“Open-ended funds that merge or liquidate every year in the U.S. market account for about 5%; liquidation is a normalized market-clearing mechanism.” A Shanghai Securities fund analyst noted, “But domestically, because liquidation procedures are complex and there are concerns about reputation risk, fund companies often choose to ‘tough it out’ by ‘keeping it alive’ through resolutions on continued operation, resulting in many zombie funds occupying resources for the long term.”

To address this dilemma, several industry insiders suggest that for mini funds whose meetings of fund holders have failed to be held repeatedly, fund companies could be allowed to apply for forced liquidation. At the same time, a fast-track channel for mini fund transformation should be established to allow eligible funds to change registration to other types of products through a simplified procedure. Additionally, it is necessary to strengthen the principal responsibility of fund companies and adopt prudent regulatory measures for managers that hold large numbers of mini funds for the long term, including restricting new product submissions and increasing requirements for risk reserves, thereby forcing the industry to optimize its product supply structure.

Industry insiders said that the fate of Bosera Guozheng Large-Cap Growth ETF will be revealed on April 29. Regardless of the outcome, this case will once again warn the industry: in the context of changes to the asset management ecosystem, establishing a market-based, law-based fund exit mechanism, breaking the “can be born but never die” vicious cycle, is already the必由之路 for high-quality development of the public funds industry. When the liquidation bell of interbank CD funds rings, it may very well be the beginning of the industry taking the market-clearing mechanism seriously and reshaping the product ecosystem.

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