Fund managers in China may see a major blow to their salaries. If they do not meet the set performance standards, their salaries can be cut by up to 50%. This decision is part of a comprehensive reform in the country’s 33 trillion yuan ($4.6 trillion) mutual fund industry. According to a Bloomberg report, the purpose of the reform is to motivate fund managers to promote long-term investment.
China’s regulatory body, the China Securities Regulatory Commission (CSRC), has proposed that if a fund suffers a loss or gives a return up to 10% less than its benchmark, the salary of the concerned fund manager can be cut by up to 50%.
According to sources cited in the report, this initiative is part of efforts to establish a long-term evaluation framework for fund managers. However, it is not clear when this policy will be implemented.
According to the report, this proposal is currently at the draft stage and has not been finalised. Under the initial plan, fund performance will be given more than 50% weightage in senior management’s evaluation, while other factors such as the size of the firm and its ranking will have less influence.
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According to Dhirendra Kumar, CEO, Value Research, this initiative aligns with China’s broader “common prosperity” campaign, which aims to address income inequality and promote equitable wealth distribution.
“As part of this drive, several state-backed financial institutions have already implemented annual salary caps for their senior executives. For instance, China Merchants Fund Management and Bosera Asset Management have capped annual incomes at 3 million yuan and 2.9 million yuan, respectively, and have requested employees to return any excess pay received in previous years,” he wrote in a post on X.
China has also introduced a salary cap of 1 million yuan ($137,309) per year for employees at central government-owned financial institutions. This move mainly impacts middle and senior managers, with the cuts largely coming from reduced bonuses.
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These reforms reflect the government’s efforts to promote fairness and accountability within the financial sector, ensuring that compensation is closely tied to performance and that excessive incomes are curtailed, writes Kumar, who is also a mutual fund industry veteran,
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