According to a Bloomberg report citing sources familiar with the matter, China is considering a major overhaul of its mutual fund sector, worth 33 trillion yuan ($4.6 trillion), which could include significant pay reductions for fund managers who don’t meet certain performance benchmarks.
The China Securities Regulatory Commission (CSRC) is reportedly proposing cutting fund managers’ salaries by 50% if their products either incur losses or fall short of their benchmark returns by 10%. The measures are part of a proposed long-term assessment framework aimed at encouraging sustained investment growth.
The draft policy suggests fund managers’ evaluation would be heavily weighted towards fund performance, accounting for at least half of the criteria, with less emphasis on factors like company size and ranking. However, the details are still under discussion and could be changed in the future.
This aligns with larger policy efforts to draw more long-term investment into China’s stock markets amid economic challenges and ongoing trade tensions with the U.S. Wu Qing, the country’s top market regulator, had hinted at such reforms earlier, suggesting they could boost mutual fund equity holdings by 10% annually over the next three years.
In recent years, China’s mutual fund industry has seen growth and drawn interest from global asset managers such as Fidelity International Ltd. However, numerous products have failed to meet performance expectations, undermining client trust and complicating efforts to raise funds.
According to the draft measures, at least 80% of a fund manager’s evaluation would be based on performance spanning three years or more. Their remuneration could be postponed or clawed back when necessary.
Additionally, criteria such as net value growth of their products, profitability, and the percentage of investors making a profit would be included in their assessment metrics.
