New China guidelines to base asset managers' pay on the performance of funds that they run

Core Viewpoint - The China Securities Regulatory Commission (CSRC) is implementing guidelines to link mutual fund managers' salaries to fund performance, aiming to eliminate elitism in the industry [1][4]. Group 1: Regulatory Changes - The CSRC has called on 160 mutual fund houses to establish a performance-based salary mechanism, suggesting that up to 80% of annual salaries should be determined by fund performance [1]. - The regulator is currently soliciting opinions from industry officials regarding the new rules, but has not provided a timeline for enforcement [2]. Group 2: Salary Caps and Industry Context - In the previous year, Beijing capped annual salaries for financial services workers at 3 million yuan (approximately US$424,322) to address wealth disparity among professionals [3]. - Senior managers in top fund-management firms previously earned up to 6 million yuan, making them some of the highest-paid professionals in China, with part of their compensation linked to the size of the funds managed [5]. Group 3: Historical Context and Performance Issues - The mutual fund industry in China saw significant growth from 2006 to 2010, benefiting asset managers who experienced substantial increases in remuneration during this period [6]. - A 2008 report indicated that the performance of domestic funds was largely unrelated to the managers overseeing them, highlighting a disconnect between management and fund performance [7].