Core Viewpoint - The article discusses the upcoming regulatory changes in the public fund industry, specifically the new performance assessment guidelines that will significantly impact fund manager compensation, linking it closely to long-term performance and addressing the issue of fund managers profiting despite poor performance [3]. Group 1: Regulatory Changes - The new guidelines, titled "Performance Assessment Management Guidelines for Fund Management Companies (Draft for Comments)," will tie the compensation of active equity fund managers to their long-term performance, introducing a strict reward and punishment mechanism [3][4]. - Fund managers whose products underperform the benchmark by more than 10 percentage points over three years and have negative profit margins will face a mandatory salary reduction of at least 30% [4][5]. - Conversely, fund managers whose products significantly outperform the benchmark and are profitable will be eligible for reasonable salary increases [5][6]. Group 2: Impact on Fund Managers - As of December 5, over 1,400 active equity products have underperformed their benchmarks by more than 10 percentage points over the past three years, affecting nearly 1,000 fund managers [3][6]. - Notable fund managers, such as Shi Cheng and Liu Yan Chun, are among those whose products are at risk of salary reductions due to poor performance [6][7]. - In contrast, 982 active equity funds have outperformed their benchmarks by over 10 percentage points, with 146 of these exceeding 50 percentage points, indicating a clear distinction between high and low performers [7][8]. Group 3: Long-term Assessment Mechanism - The introduction of a tiered performance salary adjustment mechanism marks a shift from previous vague assessments to a more operational and clear evaluation system [4][5]. - The guidelines emphasize a long-term assessment approach, with performance indicators such as fund profit margins and the proportion of profitable investors being included in the core quantitative assessment [11][12]. - The new rules aim to strengthen the alignment of interests between fund managers and investors, ensuring that key personnel have a vested interest in the performance of the funds they manage [12].

Core Viewpoint - The new regulatory guidelines for fund management companies are set to significantly reshape the compensation structure for fund managers, linking their pay to long-term performance and establishing a strict reward and punishment mechanism aimed at addressing the issue of fund managers profiting despite poor performance [1][2]. Summary by Sections Performance-Based Compensation - The new guidelines stipulate that active equity fund managers will see their compensation closely tied to their long-term performance, with a mandatory reduction of at least 30% if their managed products underperform the benchmark by over 10 percentage points over three years and incur losses [1][2]. - As of December 5, over 1,400 active equity products have underperformed their benchmarks by more than 10 percentage points in the past three years, affecting nearly 1,000 fund managers, including well-known figures like Shi Cheng and Liu Yan Chun [1][2]. Shift from Scale to Performance - The guidelines introduce a tiered performance-based compensation adjustment mechanism, moving away from the previous focus on management scale and relative industry rankings to a model centered on absolute returns and investor experience [2][4]. - Approximately 38.43% of the 3,757 active equity fund products analyzed have underperformed their benchmarks by over 10 percentage points [2]. Detailed Assessment of Fund Managers - Among the underperforming products, 322 active equity funds have consistently failed to meet the benchmark, with notable examples including funds managed by Shi Cheng and Liu Yan Chun, which have significantly lagged behind their benchmarks [3]. - In contrast, 982 active equity funds have outperformed their benchmarks by over 10 percentage points, with 146 of these exceeding the benchmark by more than 50 percentage points, qualifying their managers for potential salary increases [4]. Regulatory Context and Long-term Incentives - The push for long-term performance evaluation and compensation reform has been a focus of regulatory bodies, with previous statements emphasizing the need for a robust long-term assessment framework [5][6]. - The new guidelines require that performance metrics account for at least 80% of fund manager evaluations, with specific weightings for benchmark comparisons and fund profitability [6]. Binding Interests of Fund Managers and Investors - The guidelines enhance the alignment of interests between fund managers and investors by increasing the required investment of fund managers in their own products, with a new minimum of 40% for fund managers and 60% for senior management [6][7]. - The industry is gradually implementing long-term assessment practices, with some firms already adopting multi-year performance metrics for evaluating fund managers [7].