Core Viewpoint - The China Securities Regulatory Commission (CSRC) has released a draft for public consultation regarding performance benchmarks for public funds, indicating a shift towards a clearer and more stable reference system for evaluating fund performance [1][2]. Group 1: Performance Benchmark Reform - The new guidelines aim to upgrade the performance benchmarks for public funds, marking a significant step into the "stock reform" phase of public fund reform [1]. - The performance benchmark serves as a "yardstick" for public funds, helping investors understand the fund's investment focus and risk-return characteristics [2]. - The reform addresses issues of "style drift" and "misalignment" in fund performance, ensuring that fund managers adhere to their stated investment strategies [2]. Group 2: Selection and Management of Benchmarks - Fund managers are required to select benchmarks from an established library of benchmark elements, ensuring that the benchmarks accurately reflect the fund's investment direction and strategy [3][4]. - Once set, benchmarks cannot be easily changed due to manager turnover or market trends, ensuring that funds remain true to their stated objectives [5]. - The calculation methods and data sources for benchmarks must be transparent, with funds required to disclose the basis for benchmark selection in contracts and reports [6]. Group 3: Accountability and Oversight - The new regulations mandate that fund companies establish systems for the selection, disclosure, monitoring, evaluation, and accountability of performance benchmarks [7]. - The decision-making process for benchmark selection will be elevated to the management level, ensuring accountability [7]. - Independent departments within fund companies will monitor deviations from investment styles, with a compliance management system in place [7]. Group 4: Impact on Fund Management and Sales - The new rules require that performance benchmarks be reasonably integrated into fund manager compensation, sales practices, and fund evaluations to mitigate aggressive investment behaviors [8]. - Fund managers whose long-term performance significantly lags behind benchmarks will see a notable decrease in performance-related compensation [8]. Group 5: Transition for Existing Products - The transition to new benchmarks for existing products will be gradual, with a one-year period for adjustments to avoid market disruption [9]. - Fund managers are encouraged to align benchmarks with the actual investment styles of their products, preventing drastic portfolio adjustments that could affect market stability [9]. - The CSRC's previous initiatives have already begun to shift the focus of fund companies from scale to returns, with new floating fee models being introduced [9]. Group 6: Future Directions - Future reforms will continue to deepen, with upcoming revisions to fund manager compensation rules that will incorporate performance comparisons against benchmarks [10]. - The goal is to further align the interests of fund companies with those of investors, ensuring that poor performance leads to reduced compensation for fund managers [10].