China’s mutual fund owners should prioritise investors’ interests and promote long-term, sustainable development, according to a business group.
Chinese fund managers are ranked by performance on an annual, quarterly, and monthly basis, fostering a culture that some analysts say contribute to wild swings in stocks.
The guidelines from the Asset Management Association of China (AMAC) come as local fund managers face direct competition from global players such as BlackRock and Fidelity International, after Beijing scrapped foreign ownership restrictions.
Mutual fund houses should defer bonus payments to senior executives and fund managers, and reclaim or claw back employees’ remuneration if they misbehave, AMAC said in guidelines designed to promote development of the $3.8 trillion industry.
Fund companies are banned from short-term performance reviews and excessive incentives, and their senior executives and fund managers must use a portion of their bonus to buy the companies’ own products, according to guidelines published by the AMAC.
Companies should also set up incentive systems that can retain high-quality talent without increasing risks or endangering compliance, AMAC said.
According to the new guidelines, which take effect immediately, at least 40% of senior executives’ and fund managers’ bonuses must be subject to deferred payment spanning a period no shorter than three years.
Performance reviews must reflect long-term cycles, or investment performance of at least three years, AMAC said.
Senior executives must use at least 20% of their bonus to buy the companies’ own mutual funds, and fund managers must invest at least 30% of the money, according to the guidelines.
- Reuters, with additional editing by George Russell