Regarding the development of equity funds, the Operating Measures lowers the threshold on the supply side while continuously strengthening constraints.
On October 9, in order to regulate the investment operations of public mutual funds, support the development of equity funds, and improve the operational flexibility of public mutual funds, the China Securities Regulatory Commission publicly solicited opinions on the Measures for the Administration of the Operation of Publicly Offered Securities Investment Funds (Draft for Comment) (hereinafter referred to as the Operating Measures) and supporting rules.
This is the first systematic revision of the Operating Measures in 12 years since the 2014 version came into effect, and it is also an important step in implementing the reform for the high-quality development of public mutual funds.
The most notable change in the new version of the Operating Measures lies in the adjustment of the policy focus. While further lowering the establishment threshold for equity funds, it for the first time writes "counter-cyclical布局" into departmental regulations, and upgrades the performance benchmark into a full-process management mechanism to further constrain the drift phenomenon in investment behavior.
In fact, regulators have long attached importance to equity funds. Their positioning has already extended from an issue of the industry's own development to the level of optimizing the investor structure and enhancing the intrinsic stability of the capital market. A series of institutional optimizations, including this revision of the rules, all confirm the reform thinking for the high-quality development of public mutual funds over the past two years.
In January 2025, Wu Qing, Chairman of the China Securities Regulatory Commission, clearly proposed at a press conference of the State Council Information Office that public mutual funds should hold A-share circulating market value with an increase of at least 10% each year over the next three years. The setting of this mandatory target means that the scale expansion of equity funds is no longer merely an option for industry development, but a rigid requirement for the supply of medium- and long-term capital in the capital market.
On June 6, 2026, Wu Qing further stated at the Fourth Member Congress of the Asset Management Association of China that the reform of public mutual funds has reached a key juncture where "the chess game has reached the middle stage." He emphasized the need to focus on equity investment, which is where the industry's advantage and key strength in serving investors lies, and to make greater efforts to strengthen investment research professional capacity building and enhance the industry influence and competitiveness of equity investment; it is necessary to strengthen the matching of supply and demand, attach importance to the creation of steady products such as equity-containing low-volatility products, launch more investment products suitable for medium- and long-term capital, better meet the differentiated needs of different groups, and at the same time accelerate the transformation toward buyer's advisory services oriented to investor returns, continuously improving investor satisfaction and sense of gain.
Constraints on public mutual funds have also been strengthened simultaneously. "Resolutely curb persistent problems such as betting on tracks, style drift, and high-level issuance, and do not return to the old path of 'chasing scale and making quick money,'" Wu Qing previously mentioned.
Developing Equity Funds
For the development of equity funds, the Operating Measures lowers the threshold on the supply side while continuously strengthening constraints.
On the supply side, the establishment threshold for equity funds and fund of funds (FOF) is reduced from scale of 200 million yuan and 200 million units to 50 million yuan and 50 million units respectively; the threshold for fixed-income funds remains unchanged. As a result, fund managers will not give up issuing equity products at market lows simply because of fundraising difficulties.
The other end of supply is constraint. The draft for comment for the first time writes "counter-cyclical布局," requiring fund managers to "strengthen counter-cyclical布局 management of fund products based on factors such as market capacity, liquidity, valuation levels, and the company's own investment management capabilities."
At the same time, the performance benchmark has been upgraded from a compliance item to a "full-process management mechanism," requiring fund managers to ensure that the performance benchmark "effectively represents investment style, measures investment performance, and constrains investment behavior."
"If there is only a lowering of the threshold without benchmark constraints, fund products may be established in large numbers at lows, but style drift and chasing rises and killing falls may appear again at highs, and the policy effect will be greatly reduced," an industry insider analyzed.
Constraints on existing products are also tightening. According to the Operating Measures, mini funds, including small-scale sponsored funds, may choose to continue to exist, but if they continue to exist, their fixed operating expenses will no longer be charged from fund assets, but borne by the manager itself. Previously, these costs were shared by holders, and managers lacked incentive to actively liquidate. After the change to being borne by managers, the economic calculation between shell preservation and exit becomes clearer, and the mandatory exit mechanism further tightens the space for maintaining mini funds for a long time to preserve license resources.
The rules on classification and naming in the Operating Measures further strengthen the logic of constraint. Specifically, equity hybrid funds must have a minimum investment proportion in equity assets of more than 60%; bond-biased hybrid funds must have a maximum investment proportion of less than 30%; the range between the upper and lower limits of the proportion for other hybrid funds shall not exceed 40%.
In response to the problem of style drift, the draft for comment requires that if a fund name shows the investment direction, the contract and prospectus shall clearly define the investment direction in an identifiable or quantifiable manner, and more than 80% of the fund's total assets shall belong to the content determined by the investment direction; if the fund name does not show a specific industry or theme, the fund manager "shall strengthen decentralized investment management and shall not concentrate investment in a single industry or theme."
Emphasis on Steady Products
The Operating Measures leaves room for the strategy implementation of "fixed income plus" products. It mentions that, except for FOF, the market value of other funds held by one fund shall not exceed 30% of the fund's net asset value. This means that bond-biased hybrid products positioned as "fixed income plus" can allocate no more than 30% of assets to other funds, thereby indirectly obtaining diversified returns such as equity and derivatives through funds on the basis of bonds as the foundation, without directly holding a large number of stocks or derivatives.
While the system leaves room, the use of the "steady" label is also tightening. Supporting documents mention that for hybrid funds whose total upper limit on the proportion of equity assets and convertible corporate bonds and exchangeable corporate bonds is higher than 30%, the fund contract, prospectus, and other legal documents and promotional materials shall not use expressions such as "fixed income enhanced" or "steady returns."
Convertible bonds and exchangeable bonds have both debt and equity characteristics, and their price fluctuation characteristics are closer to equity assets. Including these two types of assets together with equity assets in calculating the upper limit of the proportion means that regulators' recognition of the "steady" label no longer only looks at stock positions, but also takes assets with equity attributes into consideration.
Suitable for Medium- and Long-Term Capital
The introduction of perpetual closed-end funds is an important highlight in this Operating Measures. Compared with regular open-end funds and fixed-term closed-end funds, perpetual closed-end funds cancel the open period and maturity date, and the subscription and redemption channel is permanently closed at the contract level, so managers do not need to reserve liquidity or adjust strategies for redemptions at any point in time. This move is intended to provide duration-matching tools for long-term capital such as insurance and pensions.
The supporting documents also make clear that fund managers may arrange for investment management personnel to concurrently manage public mutual funds, pension investment portfolios, and private asset management plans in order to improve the ability to serve medium- and long-term capital. However, this relaxation comes with strict conditions: managers shall take effective measures to prevent conflicts of interest, strictly control the improper flow and use of sensitive information, and strengthen fair trading management; the performance assessment and remuneration level of relevant investment management personnel shall not be linked to the scale, performance fees, or management fees of private asset management plans. Managers shall also reasonably set the number and scale of all products managed by the same investment management personnel to ensure that they have sufficient ability to perform their duties.
Increasing Penalties
The Operating Measures also further upgrades the penalties for responsible persons. The 2014 version mostly set the upper limit for violations at "a fine of no more than 30,000 yuan," and the targets of punishment were mainly institutions. The new version of the Operating Measures raises the upper limit of fines to 100,000 yuan, and where financial security is involved and harmful consequences exist, an additional fine of no more than 200,000 yuan shall be imposed, and for the first time it clearly provides that directly responsible managers and other directly responsible personnel shall be given warnings and fines at the same time.
Industry insiders believe that the increase in the upper limit of fines and the supplementation of provisions on responsible personnel play a substantial role in promoting the compaction of individual responsibility and strengthening compliance constraints. "Fund managers, senior executives, and other specific executors can no longer hide behind institutions, and the cost of individual violations has been substantially raised. If responsibility remains only at the institutional level, the cost of individual violations is too low to form effective constraints. Directly linking the basis for fines to individuals and setting aggravated provisions linked to harmful consequences for financial security is an important means of raising the cost of violations at the institutional level."