China’s financial regulators are moving to dismantle the industry's obsession with short-term gains, mandating a sweeping overhaul of how mutual fund executives and managers are compensated. The Asset Management Association of China (AMAC) has issued new guidelines requiring fund management companies to establish performance appraisal systems centered on investment returns rather than simple asset growth. This shift aims to bridge the long-standing gap between fund performance and actual investor profitability.
Under the new directive, fund managers must now prioritize long-term metrics, with indicators covering three years or more accounting for at least 80% of their performance weight. This move is designed to curb the 'star manager' culture and the reckless pursuit of volatile, short-term market trends that often leave retail investors stranded when bubbles burst. The guidelines explicitly state that performance must be measured not just by Net Asset Value (NAV) growth, but by the actual proportion of investors who are seeing positive returns.
The regulatory reach extends beyond the trading desk to the very top of the corporate ladder. Chairmen, senior executives, and heads of key business departments are now subject to these long-cycle evaluations. By tethering the compensation of leadership to sustained investment performance and compliance, Beijing is attempting to instill a culture of stewardship over the traditional focus on expanding Assets Under Management (AUM) to maximize management fees.
In addition to financial returns, the new framework integrates 'social responsibility' and 'compliance' as core pillars of performance. This includes assessments of internal risk controls, employee integrity, and investor education efforts. Early reports suggest the impact will be immediate; managers who underperform their benchmarks by more than 10% while posting negative returns over a three-year period could see their performance-based pay slashed by 30% or more, signaling a new era of accountability in China’s $4 trillion mutual fund market.