China Launches Sweeping Public Fund Reform to Boost Investors' Returns, Curb "Guaranteed Profits" Model

CFP

TMTPOST — China’s top securities regulator has launched a sweeping reform aimed at overhauling the country’s public fund industry, targeting fee structures and performance assessments in a bid to align fund managers’ interests more closely with those of investors.

Wu Qing, Chairman of the China Securities Regulatory Commission (CSRC), announced Tuesday that the Action Plan for Promoting the High-Quality Development of Public Funds would be officially released today. The new policy is designed to break the industry’s long-standing “guaranteed profits regardless of market conditions” model by introducing more dynamic fee mechanisms, bolstering long-term performance evaluations, and shifting the sector’s focus from asset scale to investor returns.

“The reform plan has undergone over 30 rounds of targeted surveys, gathering feedback from investors, institutions, and other stakeholders,” Wu said at a press conference hosted by the State Council Information Office. “It directly addresses the bottlenecks and pain points that investors care about most.”

Under the action plan, actively managed equity funds will be required to adopt a more flexible fee structure—particularly penalizing underperformance. According to Wu, some fund houses are already preparing to launch innovative “fulcrum-style” floating fee products that tie management fees more closely to investment results.

Additional measures include:

• Factoring in whether fund performance beats benchmarks and the actual profit/loss status of investors in performance evaluations;

• Mandating clear, benchmark-based comparisons for fund performance;

• Requiring that long-term evaluations—spanning at least three years—account for 80% or more of total performance assessments;

• Accelerating the rollout of regulations governing public fund investment advisors.

Wu emphasized that these reforms aim to build a more professional and trustworthy investment environment. “The era of ‘chasing size over substance’ is over. What matters now is delivering real returns to investors,” he said.

The CSRC outlined four strategic priorities:

1. Investor Alignment – Public funds must implement fee mechanisms that penalize poor performance, encouraging alignment of interests between fund houses and investors.

2. Stability of Investment Behavior – Funds must adopt clear performance benchmarks to reduce style drift and product mislabeling. Companies will also be required to strengthen internal incentive systems with longer assessment windows.

3. Service Capabilities – Regulations for public fund advisors will be expedited to enhance professionalism and standardization in investor services.

4. Equity Fund Expansion – The reform will prioritize growing the equity fund sector to channel more long-term capital into China’s stock market.

Wu also paid tribute to Warren Buffett, who is stepping down this year, emphasizing the continued relevance of value investing principles. “While Buffett may retire, rational, long-term investing will not,” Wu said. “China’s market has all the ingredients—top-tier companies, seasoned entrepreneurs, and increasingly, we expect to see world-class investment institutions emerge.”

Tuesday’s announcement follows a series of earlier disclosures by Wu in recent months signaling a deeper reform agenda. At the January and March press briefings, he laid out several goals, including:

• Cutting fund sales fees starting in 2025, potentially saving investors around 45 billion yuan annually;

• Boosting A-share free float market cap by at least 10% annually through equity fund growth;

• Transitioning pilot floating-rate products into mainstream offerings;

• Implementing fast-track registration for stock ETFs, with approvals to be completed in five business days;

• Guiding fund companies to reinvest a portion of annual profits into their own equity products;

• Curbing excessive speculation and penalizing “style drift” and high-turnover behavior.

In tandem with recent moves such as the Action Plan for Promoting the High-Quality Development of Indexed Investmentand ongoing fund fee reform, the CSRC is working to elevate the role of public funds in China’s capital markets.

“With the launch of this action plan, China’s public fund industry is entering a new phase focused on professionalism, responsibility, and long-term investor value,” Wu said. “Our goal is a virtuous cycle of stronger returns, stable capital inflows, and healthier markets.”