Editor's note: Medium- and long-term capital is a key pillar for the long-term stable development of the capital market, and an important force for promoting a virtuous cycle of investment and financing and improving the efficiency of resource allocation. Encouraging medium- and long-term capital to enter the market and achieving "long-term money for long-term investment" has been a consistent reform direction for the capital market. Over the past two years, with the implementation of policies such as the Guiding Opinions on Promoting the Entry of Medium- and Long-Term Capital into the Market, from expanding equity investment to improving long-cycle assessment, from enriching product supply to optimizing investment mechanisms, the relevant institutional foundation has been continuously consolidated and the market ecosystem has continued to improve. The orientation of "long-term money for long-term investment" has become clearer and more systematic in its implementation. Against this backdrop, this newspaper launched a series of reports titled "Drawing Long-Term Capital to Build a Solid Market Foundation," focusing on three important types of institutional capital—public mutual funds, bank wealth management, and insurance funds—to observe the deep changes and practical effects brought by the entry of medium- and long-term capital over the past two years, sort out the bottlenecks that still need to be resolved, and explore effective paths for improving the "long-term money for long-term investment" mechanism.
On September 26, 2024, the Central Financial and Economic Affairs Office and the China Securities Regulatory Commission jointly issued the Guiding Opinions on Promoting the Entry of Medium- and Long-Term Capital into the Market (hereinafter referred to as the Guiding Opinions), aiming at the overall goals of "more long-term money, longer-term money, and better returns," and explicitly proposing to "vigorously develop equity public mutual funds" and "guide fund companies to shift from a scale orientation to an investor-return orientation." Data disclosed by the China Securities Regulatory Commission on September 10 showed that since the beginning of this year, medium- and long-term capital such as social security funds, annuities, and insurance has recorded a combined net purchase of more than 600 billion yuan in A-shares, and the market value of their holdings of tradable A-shares has increased by 12.5% compared with the end of 2025. In addition, the total scale of public mutual funds climbed from 31.08 trillion yuan at the end of June 2024 to 39.67 trillion yuan at the end of June 2026, while the combined scale of equity funds (mainly including stock funds and mixed funds) increased from 6.65 trillion yuan to 9.71 trillion yuan.
Behind the growth, the logic of product supply is changing, assessment and fee mechanisms are changing, and the "proportion of profitable investors" has become a mandatory disclosure item. How to truly convert "long-term money" into "long-term investment" remains an issue that the public mutual fund industry must continue to address.
Product Supply Targets Long-Term Capital Needs
Medium- and long-term capital is the "ballast stone" and "stabilizer" for maintaining the smooth and healthy operation of the capital market. Promoting the entry of medium- and long-term capital helps form a pattern in which investment and financing development are more balanced and the functions of the capital market are better utilized. Public mutual funds are both important suppliers and core managers of medium- and long-term capital, and they play a key role in this process. The Guiding Opinions were precisely aimed at this, explicitly proposing requirements such as establishing a fast-track approval channel for ETF index funds, continuously increasing the scale and proportion of equity funds, and steadily lowering the comprehensive fee level of the public mutual fund industry.
Since then, policies have continued to advance. The Implementation Plan for Promoting the Entry of Medium- and Long-Term Capital into the Market issued in January 2025 made clear that the market value of A-shares held by public mutual funds should grow by at least 10% each year over the next three years. In May 2025, the Action Plan for Promoting the High-Quality Development of Public Mutual Funds (hereinafter referred to as the Action Plan) was introduced, making "a weight of no less than 80% for medium- and long-term performance assessment over three years or more" a hard constraint and promoting a floating management fee model based on performance benchmarks. In January 2026, the Regulations on the Administration of Sales Fees for Publicly Offered Securities Investment Funds officially took effect, cutting off the profit incentive for "redeeming old funds and buying new ones" from the sales end. In April 2026, the Guidelines for Performance Assessment Management of Fund Management Companies (hereinafter referred to as the Assessment Guidelines) were released, greatly expanding the scope of deferred payment of performance-based compensation.
The effects of layer-by-layer policy advancement were first reflected on the product supply side, with the scale of equity funds further increasing. Wind data showed that the scale of stock funds and mixed funds increased from 6.44 trillion yuan at the end of June 2024 to 9.68 trillion yuan at the end of June 2026. The scale of ETFs increased from 2.47 trillion yuan at the end of June 2024 to 4.74 trillion yuan at the end of June 2026. The fast-track approval channel has been operating on a regular basis, and product supply efficiency has improved markedly.
The product supply logic of the public mutual fund industry has shifted from "selling whatever is available" to "tailoring throughout the process for long-term money," specifically reflected in three directions. First, the ETF product line has been further enriched beyond broad-based index funds. For example, Harvest Fund has continued to optimize its structure from core broad-based products to sector-theme ETFs, while China Merchants Fund has simultaneously laid out active ETFs, Smart Beta factor ETFs, and enhanced ETFs. Second, new-model floating management fee funds deeply bind management fee rates to holding periods and holding return levels. As of the end of June 2026, the number of new-model floating management fee funds across the market had reached nearly 300 (calculated separately for different share classes), with Harvest Fund and Bosera Fund successively launching such products and achieving sound operations. Third, long-term allocation products are being developed around product lines such as "fixed income plus" and FOFs (funds of funds), and further extending into pension finance scenarios. For example, Bosera Fund has built a full spectrum of "fixed income plus" products covering three gradients: low volatility, balanced, and aggressive. China Merchants Fund has increased its layout in pension finance products, moving from "product supply" to "pension solutions."
Chen Xianshun, chief strategy analyst at Bosera Fund, told this newspaper: "Product supply in the public mutual fund industry has shifted from simply pursuing an increase in quantity to building a layered product matrix around long-term capital needs."
Assessment and Fees Anchor to Long-Term Returns
If changes in product supply are the "surface," then reform of assessment and fee mechanisms is the "core." The Action Plan established hard constraints: in fund manager assessment, the weight of fund product performance indicators shall be no less than 80%, and the weight of medium- and long-term return assessment over three years or more shall be no less than 80%. For fund managers whose product performance over three years or more is more than 10 percentage points below the performance benchmark, performance-based compensation should decline significantly. The Assessment Guidelines further expanded the scope of deferred compensation payment (in principle no less than 40%) from senior executives and fund managers to chairmen, heads of major business departments, heads of branches, and core business personnel, and institutionalized the requirement that fund managers co-invest a certain proportion of their performance-based compensation in the funds they manage (with a holding period of no less than one year).
Although the pace of implementation varies among public mutual fund institutions, the direction is highly consistent. In terms of assessment, they are adding to long-termism and subtracting from short-term scale. Harvest Fund has fully implemented the requirement that the weight of product performance indicators account for 80% in active equity investment positions, while all products aged three years or more use rolling three-year performance data in assessment. China Merchants Fund has added indicators such as comparison with performance benchmarks, fund profit margin, and the proportion of profitable investors, while simultaneously reducing the assessment weight of operating indicators such as scale ranking, revenue, and profit. Lion Fund has built a comprehensive evaluation system combining quantitative and qualitative factors and balancing long and short terms, gradually increasing the weight of long-cycle assessment and focusing on three-year and five-year medium- and long-term investment capability, drawdown control capability, and excess performance relative to performance benchmarks.
In terms of incentives, they are adding to interest alignment and subtracting from guaranteed returns regardless of performance. A relevant person from ICBC Credit Suisse Fund told this newspaper: "The company has strengthened compensation management, deferring more than 40% of performance-based compensation for payment over the following three years, and has established a mechanism for clawing back performance-based compensation." China Merchants Fund has explored mandatory co-investment and risk-sharing mechanisms, establishing mandatory co-investment mechanisms linked to product performance for key position personnel, thereby achieving long-term consistency between manager and investor interests.
Public mutual fund fee reform is likewise driving a transformation of the industry landscape. The fee reform, advanced in three stages according to "fund managers—securities companies—fund sales institutions," has been fully completed, and regulators estimate that it has cumulatively benefited investors by more than 50 billion yuan per year. Various public mutual fund institutions have actively followed up with fee reductions. As of now, Bosera Fund has completed fee reductions and concessions for more than 120 funds. The management fee rates of many broad-based and sector ETFs under Harvest Fund are at the lowest tier in the industry (0.15% annual management fee plus 0.05% annual custody fee). Chen Xianshun acknowledged: "Fee reductions have squeezed fee revenue, but they also force public mutual fund institutions to concentrate resources on investment research capabilities and investor returns. This is precisely the original intention of fee reform." A relevant person from Harvest Fund believes that fee reductions are pressure in the short term, but in the medium and long term they are a driving force for the industry's transformation from "competing on scale and ranking" to "competing on investment research and returns."
As quantitative evidence measuring the effectiveness of the public mutual fund industry's transition toward a "return orientation," the indicator of the "proportion of profitable investors" entered public mutual fund periodic reports for the first time. According to Tianxiang Investment Consulting statistics, as of June 30, 2026, among 5,662 funds across the market that had disclosed this indicator, the median proportion of profitable investors was 92.49%, and the average was 79.02%.
Bottlenecks Continue to Be Cleared
The direction is already clear, and results are accumulating, but bottlenecks also exist. Chen Xianshun believes that the current bottlenecks facing "long-term money for long-term investment" are mainly reflected at three levels. First, on the product side, the supply of low-volatility, absolute-return-oriented products and multi-asset hedging tools remains insufficient, and the problem of long-term capital "wanting to allocate but not daring to allocate" has not yet been fundamentally solved. Second, on the assessment side, long-cycle assessment involves the balance among performance retrospective standards, deferred compensation and talent retention, and coordination between investment research and market departments. It takes time for detailed institutional rules to mesh with the existing incentive systems of public mutual fund institutions. Third, on the investment research side, "platformization" cannot be achieved overnight. To generate excess returns over three years or more around performance benchmarks, it is necessary to integrate macro, industry, and strategy research forces rather than rely on a single star fund manager.
The bottleneck in the longer chain lies "upstream." Chen Xianshun noted that long-cycle assessment, deferred compensation, and co-investment mechanisms at the public mutual fund institution level are already relatively complete, but if clients such as insurance and wealth management still assess trustees on an annual or even quarterly basis, the assessment cycle of fund managers will also be forced to become shorter-term. Wei Fengchun, chief economist at Chuangjin Hexin Fund, believes that solving the difficult transformation from "long-term money" to "long-term investment" hinges on changing the situation in which short-term assessment still dominates, long-term product supply is insufficient, and the industry ecosystem remains unbalanced. He suggested that the industry advance reform through a "five-in-one" long-term investment system based on absolute return benchmarks, risk priority, diversified allocation, team wisdom, and technological support. In terms of assessment and incentives, a cross-cycle dynamic evaluation mechanism should be established, deeply binding the returns of institutions and investment research teams to investors' long-term stable returns, and gradually changing institutions' tendency to emphasize scale over returns. In terms of the sales ecosystem, incentive rules should be adjusted to weaken short-term commissions and sales orientation, link channel returns and institutional ratings to investors' long-term holding returns and drawdown control, and cultivate a long-term companion-style investment advisory ecosystem.
In response to the aforementioned bottlenecks, the directions of effort across the industry have gradually become clear. In the investment research system, Bosera Fund continues to advance investment research integration, building a "platform-based, integrated, multi-strategy" investment research system, and uses AI to improve efficiency across the entire chain of investment research, marketing, risk control, and operations. China Merchants Fund ensures the stability and sustainability of strategies through team collaboration, steadily delivering professional capability and performance returns. In product innovation, Harvest Fund is enriching product supply, improving the spectrum of floating management fee products, expanding the layout of products linked to performance and holding periods, and deepening its work in pension finance. China Merchants Fund is focusing on developing medium- and low-volatility products. In companion-style investor services, ICBC Credit Suisse Fund took the lead in establishing the fund industry's first investor protection committee, institutionally establishing a service positioning of "growing together with clients." Lion Fund relies on its own investor service system to build an all-weather, multi-level, and personalized service model covering "guidance before investment, companionship during investment, and review after investment."
From a longer time horizon, two years of reform have pushed the evaluation focus of the public mutual fund industry to shift from "scale orientation" to "return orientation." A layered matrix on the product side is taking shape, long-term weight in assessment is being implemented, and interest alignment on the fee side is being strengthened. These changes are gradually being transmitted to investment behavior, sales behavior, and holder experience. As platform-based investment research capabilities continue to improve and product spectrums such as floating management fee products and pension finance are further enriched, the professional capacity of public mutual funds to absorb medium- and long-term capital will continue to strengthen, and the virtuous cycle of "long-term money for long-term investment" is also expected to accelerate.