Core Viewpoint - The recent regulatory changes in China's mutual fund industry aim to enhance the effectiveness of performance benchmarks, ensuring they accurately reflect fund strategies and prevent misleading practices in fund management [1][2][4]. Group 1: Regulatory Changes - On October 31, the China Securities Regulatory Commission and the Asset Management Association of China released draft guidelines for mutual fund performance benchmarks, emphasizing their role in defining investment styles and measuring performance [2][4]. - The new regulations will link fund managers' compensation to their performance relative to these benchmarks, a move that is stricter than in some developed markets [1][2][8]. - A one-year transition period has been established to adjust existing products to the new benchmarks, minimizing market disruption [3][5]. Group 2: Industry Response - As of October 31, at least 132 mutual fund products have changed their performance benchmarks this year, surpassing the total for the previous year, indicating a shift towards regulatory compliance [1][5]. - Many funds are moving away from commonly used indices like the CSI 300 to more relevant industry-specific indices that better align with their investment strategies [5][6]. - The adjustments reflect a growing recognition of the need for benchmarks that accurately represent the investment focus of funds, addressing previous issues of misalignment [5][6]. Group 3: Performance Measurement - Data shows that only 37% of actively managed equity funds have outperformed their benchmarks over the past three years, highlighting a significant performance gap [7]. - The new regulations aim to create a more transparent and stable risk-return profile for funds, reducing the occurrence of "style drift" where funds deviate from their stated investment strategies [8][9]. - Fund managers are expected to shift their focus from short-term trading to long-term strategies that optimize performance within the framework of the new benchmarks [9].