Executive Summary
The finalization of China’s public fund performance benchmark regulations marks a pivotal step towards enhanced market transparency and investor protection. Key takeaways include:
– The China Securities Regulatory Commission (CSRC) has implemented new rules to curb style drift and improve fund comparability, with seven key adjustments from the draft version addressing industry feedback.
– Changes include relaxed conditions for shareholder meetings, refined disclosure requirements, and the integration of benchmarks into fund manager compensation, promoting alignment with investor interests.
– Major fund companies like E Fund Management Co., Ltd. (易方达基金) and China Asset Management Co., Ltd. (华夏基金) emphasize that these public fund performance benchmark regulations will drive high-quality development by fostering clearer product positioning and long-term value creation.
– A one-year transition period allows existing products to adapt, setting the stage for a more disciplined and transparent asset management ecosystem in China.
– The reforms shift the industry focus from short-term rankings to sustainable excess returns, benefiting both institutional and retail investors in Chinese equities.
A Watershed Moment for China’s Fund Industry
On January 23, a new era dawned for China’s public offering fund industry as the long-anticipated performance benchmark regulations officially took effect. These public fund performance benchmark regulations, accompanied by detailed operational rules, represent a comprehensive regulatory framework designed to eliminate ambiguities in fund evaluation and protect investor interests. For global market participants, understanding these changes is crucial, as they directly influence investment decisions in one of the world’s largest and fastest-growing capital markets. The reforms aim to tackle pervasive issues like “style drift” and “fund blind boxes,” where fund strategies deviate unpredictably from stated objectives, eroding investor trust. By mandating stricter alignment between fund actions and their benchmarks, the China Securities Regulatory Commission (CSRC) is steering the industry towards greater accountability and stability.
This regulatory push is part of a broader initiative under the “25 Guidelines for High-Quality Development of Public Funds,” which explicitly called for clearer benchmark setting, modification, disclosure, and correction mechanisms. The swift progression from draft to final rule—spanning less than three months—demonstrates regulatory resolve, yet the process remained consultative, incorporating extensive industry input. Notably, the CSRC provided a generous one-year transition period for existing products, ensuring a smooth implementation. As these public fund performance benchmark regulations reshape the landscape, they promise to enhance the attractiveness of Chinese equity markets by fostering a more transparent and predictable investment environment.
Evolution and Background of the Benchmark Reforms
The journey towards these public fund performance benchmark regulations began in earnest in late 2025, with a series of consultative steps that laid the groundwork for today’s framework. Understanding this timeline is key to grasping the regulatory intent and industry preparedness.
Regulatory Milestones and Industry Engagement
The reform process kicked off on October 31, 2025, when the CSRC released the “Guidelines for Performance Benchmarks of Publicly Offered Securities Investment Funds (Draft for Comments),” with the Asset Management Association of China (AMAC) simultaneously issuing a draft operational细则 (detailed rules). This opened a period of public consultation, inviting feedback from fund houses, legal experts, and investors. By November 4, fund companies received drafts of the “Performance Benchmark Element Library” and its operational说明 (instructions), which categorized 114 benchmark indices into two tiers: a primary库 (library) of 69 indices and a secondary库 of 72 indices. This library system aimed to standardize benchmark selection, though initial industry concerns centered on its comprehensiveness.
Further refinement came on November 11, when AMAC drafted the “Guidelines for Thematic Investment Style Management of Publicly Offered Funds,” introducing a “style library” system to regulate thematic investments. This move strengthened naming conventions,量化 (quantified) standards, and custodian oversight, creating a full-cycle regulatory chain. By December 15, 2025, the first round of industry摸排 (survey) concluded, with fund companies reporting on products requiring benchmark adjustments, scale impacts, and the need for shareholder meetings. This meticulous preparatory phase ensured that the final public fund performance benchmark regulations were both pragmatic and aligned with market realities.
Core Objectives: Curbing Style Drift and Enhancing Comparability
At its heart, the regulatory overhaul seeks to address two critical pain points: style drift and the lack of standardized comparability. Style drift occurs when fund managers deviate from their stated investment strategies—for example, a technology-themed fund investing heavily in consumer stocks—which can mislead investors and inflate risks. The new public fund performance benchmark regulations enforce stricter discipline by tying benchmarks closely to fund objectives, making deviations more transparent and accountable. Additionally, by establishing a unified element library and disclosure standards, the rules enhance fund comparability, allowing investors to make informed choices based on consistent metrics. This aligns with global best practices and supports China’s capital market internationalization, as clearer benchmarks reduce information asymmetry for foreign investors.
Deep Dive into the Seven Key Regulatory Changes
The finalized public fund performance benchmark regulations introduce several nuanced adjustments from the draft version, reflecting regulator responsiveness to industry feedback. These seven changes are pivotal for practical implementation and have significant implications for fund operations.
Change 1: Weakening Explanations for Secondary Index Library Usage
In the draft rules, fund companies expressed concerns that the requirement for detailed justifications when selecting indices from the secondary库 (library) or outside the element library implicitly discouraged their use. The final public fund performance benchmark regulations address this by removing the stringent “consideration explanations” for such choices. This modification reduces administrative burdens and allows greater flexibility for niche or thematic funds that may not find suitable benchmarks in the primary library of 69 indices. For instance, a fund focusing on emerging sectors like artificial intelligence can now more easily adopt a relevant external index without facing regulatory skepticism, promoting innovation while maintaining oversight.
Change 2: Relaxed Conditions for Holding Shareholder Meetings
A major point of contention was whether benchmark changes alone would necessitate costly and time-consuming shareholder meetings. The draft included ambiguous language about “significant changes in investment style,” which could be broadly interpreted. The final public fund performance benchmark regulations clarify that shareholder meetings are only required when benchmark adjustments accompany modifications to investment objectives, scope, strategy, or proportions. This streamlining means that mere refinements to benchmarks—for better alignment with strategy—can proceed without investor投票 (voting), expediting compliance and reducing operational hurdles for fund managers. Legal experts from firms like通力律师事务所 (Llinks Law Office) view this as a pragmatic concession that balances investor protection with efficiency.
Change 3: Benchmark Elements Penetrate to Underlying Assets
This is a groundbreaking shift in the public fund performance benchmark regulations. Instead of applying blanket rules, the final guidelines require benchmark elements to be tailored to the underlying asset classes within a fund. For example, a balanced fund holding both equities and bonds must have its benchmark reflect the performance characteristics of each asset type separately. As noted by the招商证券基金评价中心 (China Merchants Securities Fund Evaluation Center), this approach better matches the diversified nature of most Chinese public funds, enhancing accuracy and relevance. It empowers investors to dissect fund performance more granularly, understanding whether returns stem from asset allocation decisions or security selection within each class.
Change 4: Adjusted Disclosure Requirements for Specific Fund Types
The disclosure mandates under the public fund performance benchmark regulations have been fine-tuned to reduce redundancy while expanding transparency where needed. Key adjustments include: weakening periodic report requirements for money market funds and products using fixed-value benchmarks; removing “credit rating distribution comparisons” for bond funds; and adding new disclosures for Fund of Funds (FOFs), requiring comparisons of asset allocation proportions between the fund and its benchmark at reporting period ends. These changes acknowledge the unique risk profiles of different fund categories, ensuring that disclosure efforts are focused and meaningful. For FOFs, in particular, this enhances clarity on how underlying fund selections align with stated objectives.
Change 5: Enhanced Custodian Oversight on Industry Theme Deviations
In the operational细则 (detailed rules) released by AMAC, a new clause requires custodians to actively monitor deviations in actively managed funds that use industry or thematic indices as benchmarks. Custodians must now flag significant single-sector exposures that stray from the benchmark’s composition. This amplifies the watchdog role of custodians, creating an additional layer of oversight to prevent style drift. For example, if a fund benchmarked to a healthcare index disproportionately invests in technology, the custodian must report this discrepancy, ensuring quicker corrective actions. This change institutionalizes a checks-and-balances system within the public fund performance benchmark regulations, bolstering investor confidence.
Change 6: Inclusion of Fund Evaluation Agencies in Sales Displays
The public fund performance benchmark regulations now explicitly require fund evaluation agencies to incorporate benchmarks into their performance展示 (displays) and rankings. This applies primarily to equity funds, hybrid funds, and FOFs, excluding money market, bond, and commodity funds. Fullgoal Fund Management Co., Ltd. (富国基金) highlights that this mandates evaluation agencies to classify funds based on benchmarks, prohibiting simplistic direct performance rankings across different risk-return profiles. It establishes a new paradigm centered on “benchmark-anchored excess return measurement,” shifting industry focus from short-term peer competition to long-term, sustainable alpha generation. This aligns sales practices with investor education, helping clients choose funds that match their risk appetites.
Change 7: Refined and Expanded Requirements for Fund Evaluation
The final rules impose more detailed responsibilities on fund evaluation agencies,压实 (solidifying) their accountability. Additions include specifying key points to monitor regarding benchmark element weights, primary investment directions, and investment styles. Moreover, the public fund performance benchmark regulations permit fund managers and sales institutions to use these agencies’ classification results officially. This creates a standardized evaluation ecosystem, reducing subjective interpretations and promoting consistency across the industry. By holding evaluation agencies to higher standards, the regulations ensure that third-party analyses reinforce—rather than undermine—the transparency goals of the benchmark reforms.
Frontline Interpretations from Leading Fund Companies
Major asset managers have swiftly responded to the public fund performance benchmark regulations, offering insights that underscore the transformative potential of these rules. Their perspectives shed light on operational impacts and strategic shifts.
Emphasizing Transparency and Investor Alignment
Wang Jun (王骏), Vice President of E Fund Management Co., Ltd. (易方达基金), stated, “As the industry’s first specialized and systematic regulatory rule for performance benchmarks, it will effectively standardize order, strengthen investment discipline, and support high-quality development of public funds.” He added that clearer benchmarks foster a market that better matches wealth management needs, boosting investor trust and获得感 (sense of gain). China Asset Management Co., Ltd. (华夏基金) echoed this, noting that benchmarks must closely align with fund contracts, enhancing product表征 (characterization) and helping investors select suitable products. This feedback highlights how the public fund performance benchmark regulations are poised to improve customer experience and reduce mis-selling risks.
Quantifying Deviations and Enhancing Accountability
Fullgoal Fund Management Co., Ltd. (富国基金) pointed out that the rules require detailed disclosures comparing actual investments with benchmarks across dimensions like yield, volatility, asset allocation, industry distribution, and duration. Quantitative metrics such as tracking error, information ratio, maximum drawdown, and annualized volatility must be included. This “anatomy” of performance allows stakeholders to distinguish whether returns come from benchmark replication, sector bets, or genuine active management. GF Fund Management Co., Ltd. (广发基金) further emphasized that stronger benchmark constraints will规范 (standardize) fund manager behavior, enhancing discipline and fostering stable investment styles. Over time, they predict that style-consistent, performance-stable products will attract more capital, injecting medium- to long-term funds into the market.
Implementation Roadmap and Industry Adaptation
With the public fund performance benchmark regulations now in force, fund companies are outlining concrete steps to comply and leverage the changes for competitive advantage. Their plans reveal a industry-wide shift towards more investor-centric practices.
Systematic Overhauls and Internal Controls
Invesco Great Wall Fund Management Co., Ltd. (景顺长城基金) announced a dual approach: systematically reviewing and assessing benchmarks across its product lineup to ensure rationality, and完善 (perfecting) fund manager evaluation systems to tie compensation more deeply to investor returns. They also plan to strengthen internal controls covering the entire benchmark lifecycle, preventing significant deviations between investment behavior and product positioning. Similarly, Caitong Fund Management Co., Ltd. (财通基金) described the rules as both a “measuring stick” and a hard constraint for internal management, prompting prudent benchmark setting and全流程 (full-process) risk controls. These measures indicate that the public fund performance benchmark regulations are catalyzing comprehensive governance upgrades within fund houses.
Integrating Benchmarks into Compensation and Performance Metrics
A cornerstone of the public fund performance benchmark regulations is the mandate to link fund manager薪酬 (compensation) to long-term benchmark outperformance. Fullgoal Fund noted that this changes the incentive paradigm from “manager-centric” to “investor-centric,” directly aligning economic interests with the creation of sustainable excess returns. The rules specify that for active equity funds with业绩 (performance) significantly below benchmarks over the long term, relevant managers’ performance pay must be noticeably reduced. Wang Jun (王骏) of E Fund added that this drives investment behavior to align with product positioning and holder interests. Such integration is expected to curb short-termism and promote a culture of long-term value investing, reshaping talent management across the industry.
Broader Implications for Market Ecology and Investor Strategy
The public fund performance benchmark regulations extend beyond compliance, influencing the very fabric of China’s financial markets. Their ripple effects will be felt by investors, regulators, and the global investment community.
Driving High-Quality Development and Global Competitiveness
These reforms are a linchpin in China’s ambition to transition its fund industry from scale-driven growth to quality-focused development. By reducing information asymmetry and enhancing product clarity, the public fund performance benchmark regulations make Chinese funds more attractive to sophisticated international investors seeking transparent vehicles for exposure to A-shares. This aligns with broader financial opening-up policies and could accelerate inbound capital flows. Moreover, the emphasis on style stability and long-term returns supports the CSRC’s goals of fostering a healthier market ecosystem, less prone to speculative bubbles and more conducive to capital formation for实体经济 (the real economy).
Actionable Guidance for Investors and Institutions
For investors, the public fund performance benchmark regulations necessitate a more nuanced approach to fund selection. Key actions include: scrutinizing fund定期报告 (periodic reports) for benchmark comparison disclosures; evaluating fund managers based on consistent excess returns rather than absolute rankings; and monitoring custodian reports for style deviation alerts. Institutional players should engage with fund houses to understand how benchmark integrations affect product risk profiles. As these rules mature, they may also inspire similar reforms in other jurisdictions, positioning China as a regulatory innovator in asset management. The call to action is clear: stay informed, leverage the enhanced transparency, and align portfolios with funds that demonstrate genuine adherence to their stated benchmarks.
Shaping a More Disciplined and Transparent Future
The implementation of China’s public fund performance benchmark regulations marks a definitive step towards maturing the nation’s asset management industry. By addressing core issues like style drift and benchmark ambiguity, these rules empower investors with clearer insights and hold fund managers to higher standards of accountability. The seven key changes reflect a balanced regulatory approach that incorporates industry feedback while steadfastly pursuing investor protection objectives. As leading fund companies roll out compliance measures and integrate benchmarks into compensation systems, the industry is poised for a paradigm shift—from chasing short-term scale to delivering sustainable, benchmark-aware returns. For global market participants, this evolution enhances the investability of Chinese equities, offering a more predictable and disciplined environment. Moving forward, stakeholders should actively monitor regulatory updates and fund disclosures, using the new benchmark frameworks to make more informed, strategic investment decisions in China’s dynamic capital markets.