Mini funds fall into a deadlock of rollover issues; liquidation mechanisms urgently need a breakthrough

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（Source: Economic Information Daily）

Recently, the meeting of unitholders of the Bosera Guozheng CSI Large Cap Growth ETF is still in the tense tallying stage. This meeting, which was launched on March 26 and will run until April 27 for voting, 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 Certificates of Deposit AAA Index 7-Day Holding Fund officially entered the liquidation process, becoming the first comparable product to be liquidated since the launch of interbank CD funds in 2021. This signals that the scope of “mini funds” liquidations has expanded from traditional equity and fixed-income categories into once-popular innovative products.

Data from Wind shows that as of the end of March, there are still 24 interbank CD funds across the market with a scale below 50 million yuan. The “triple predicament” of mini funds—“hard to liquidate, hard to transform, hard to keep alive”—is becoming increasingly evident.

Industry insiders believe that when liquidation procedures are left in limbo for a long time because retail investors are indifferent to voting, the product ecosystem of public funds—“emphasizing first issuance and neglecting ongoing operations”—is facing severe scrutiny. How to strike a balance between protecting investors’ interests and optimizing market clearing mechanisms has become an unavoidable question for the industry’s transition from scale expansion to quality improvement.

Liquidation spreading: survival crisis from traditional categories to innovative products

On March 27, a notice issued by Zhongtai Securities (Shanghai) Asset Management Co., Ltd. announced that the “first year of liquidation” for this innovative category of interbank CD funds has officially begun.

The announcement shows that as of March 26, the net asset value of the Zhongtai CSI Interbank Certificates of Deposit AAA Index 7-Day Holding Fund has been below 50 million yuan for 50 consecutive working days, triggering the fund contract termination clause. Without convening a unitholder meeting, it entered the liquidation process. The fund was established in August 2023, with an initial offering size of 1.297 billion yuan, but its size dropped sharply to 528 million yuan only half a year later. 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, only 22 million yuan remained, and ultimately it could not escape the fate of liquidation.

“Interbank CD funds were once regarded as the best substitute for money market funds, but amid falling interest rates and abundant liquidity, their yield advantage has disappeared, and the pressure from channel redemptions is huge.” A fixed-income products manager at a fund company analyzed, “This is not only the failure of a single product, but also the failure of lifecycle management for the category—when market conditions change, a ‘hit product’ that lacks liquidity arrangements and investor education is all too likely to become a sacrifice for ‘mini funds.’”

This is not an isolated case. On March 24, the Bosera fund under Bosera Asset Management published a notice about convening a unitholder meeting for the Bosera Guozheng CSI Large Cap Growth ETF, and on March 26 it issued a second reminder notice to deliberate the proposal on continued operation. The fund’s net asset value has been below 50 million yuan for 60 consecutive working days. According to the 《Measures for the Operation and Management of Publicly Offered Securities Investment Funds》, the fund manager should report to the China Securities Regulatory Commission within 10 working days and propose solutions, and convene a unitholder meeting within 6 months. The voting period runs from March 26 to April 27, and the tally day is April 29. The meeting is still waiting for a “life-or-death vote” from unitholders.

Even more absurd is the “serial drama of keeping the fund alive” for the Yinhe Electric Power ETF. On March 9, Yinhe fund announced that it would convene a unitholder meeting for the Electric Power ETF via correspondence to consider a proposal on continued operation. This is the fund’s third meeting of the same type within three years: first, in June 2024, the proposal was passed with a 100% approval rate; second, in February 2025, the meeting was scrapped due to participation rate below 50%; and now in March 2026, it is struggling again.

What is puzzling is that as of March 9, the Yinhe Electric Power ETF’s year-to-date gain had exceeded 14%, and the power sector is becoming the market’s main theme, yet funds chose to exit—about 8 million yuan in net outflows occurred over nearly 20 days. Related insiders believe this divergence of “performance rising while scale shrinks” exposes the “self-fulfilling trap” after liquidity for mini funds dries up: the smaller the scale, the less institutions dare to enter; the more institutions withdraw, the greater the redemption pressure on retail investors, ultimately falling into a vicious cycle.

A dilemma in the mechanism: unitholder meetings made hollow and resources idling

“The core difficulty in liquidating mini funds lies in the rigid constraints of the unitholder meeting system design and the failure in real-world execution.” A related person at a fund company noted that under current regulations, liquidation or transformation of a fund must be approved by a unitholder vote, and it must also satisfy the requirement that attendance of the represented units reaches more than half of the total units as of the rights registration date. But mini funds typically have highly dispersed unitholders with many small accounts; large numbers of investors forget their holdings or ignore the vote, resulting in the meeting being unable to meet the statutory conditions for convening.

The trading halt arrangements for the Bosera Large Cap Growth ETF highlight liquidity risk. To protect unitholders’ interests, Bosera has applied to the Shenzhen Stock Exchange for halt-and-resumption arrangements. The first trading halt will be from the opening of trading on March 24 until 10:30 a.m. The second trading halt will be from the opening of trading on the tally day, April 29, until 10:30 a.m. on the day the voting results are announced, when trading will resume.

Related insiders said this means that during the month-long voting period, the fund faces significant liquidity management pressure: if the vote passes and continued operation is approved, the fund will keep idling in its mini state; if the vote fails, it will need to enter the liquidation process, and unitholders will face a longer period of funds being frozen.

“For a fund company, these products with a scale below 50 million yuan are not only a ‘negative contribution’ to management fee income, but also a black hole of operating costs.” The above-mentioned insider at a fund company calculated: A mini fund needs to pay fixed costs every year—information disclosure, audits, valuation, systems, and so on—of about 300,000 to 500,000 yuan. If the scale stays below 30 million yuan for a long time, management fee income can hardly cover the costs, becoming a tangible “zombie asset.” Moreover, large numbers of zombie funds occupy resources such as regulation, custody, and sales, distorting the market pricing mechanism.

“In the U.S. market, open-ended funds merged or liquidated each year account for about 5%; liquidation is a normalized market clearing mechanism.” A fund analyst at a Shanghai securities firm pointed out, “But domestically, because liquidation procedures are complex and there are concerns about reputation risk, fund companies often choose to ‘tough it out.’ By pushing the proposal for continued operation—‘keeping it alive’—they cause many zombie funds to occupy resources for the long term.”

To address this dilemma, multiple industry insiders suggest that for mini funds whose unitholder meetings have failed consecutively multiple times, consideration could be given to allowing fund companies to apply for forced liquidation. At the same time, a fast-track mechanism for mini fund transformation should be established, allowing funds that meet the requirements to change registration to other types of products through a simplified process. In addition, fund companies’ main responsibility should be strengthened. For managers that hold large numbers of mini funds over the long run, prudent regulatory measures should be taken, including restricting the submission of new product applications and raising requirements for risk reserves, so as to push the industry to optimize its product supply structure.

Industry insiders said that the fate of the Bosera Guozheng CSI Large Cap Growth ETF will be revealed on April 29. Regardless of the outcome, this case again warns the industry: amid changes in the asset management ecosystem, establishing a market-based and rule-of-law fund exit mechanism, breaking the “only alive, never dead” vicious cycle, is the only path for the high-quality development of the public fund industry. When the liquidation bell for interbank CD funds rings, it may be the beginning of the industry facing the reality of clearing mechanisms and reshaping the product ecosystem.

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