Key facts
- China's mutual fund industry saw strong returns in 2025, with assets under management reaching over 37 trillion yuan.
- Nearly 95% of mutual funds had positive returns in 2025.
- The China Securities Regulatory Commission is implementing reforms to prioritize investor returns over asset growth.
- AI-focused funds were top performers, with one fund achieving a 240% annual return.
- Regulators are introducing stricter rules for fund sales and manager compensation to curb risky practices.
- AI-focused mutual funds in China delivered returns over 200 percentage points higher than traditional portfolios in the first half of the year.
China's mutual fund industry experienced a significant turnaround in 2025, with assets under management surging to over 37 trillion yuan ($5.4 trillion). Nearly 95% of funds operating for the entire year saw positive returns, driven by a technology-led bull market.
However, the year was also marked by landmark regulatory changes. The China Securities Regulatory Commission announced a plan to shift the industry's focus from mere scale to investor returns, aiming to foster long-term stability. This reform targets deeply entrenched practices where fund companies often make concentrated bets on market hotspots, prioritizing rapid asset growth over long-term investor interests.
This legacy playbook was particularly evident in the technology sector, with many funds aggressively betting on artificial intelligence (AI). The year's top performer, a technology select fund managed by Ren Jie of Maxwealth Fund Management, achieved an extraordinary 240% annual return, with its assets soaring from 10.3 million yuan to over 10 billion yuan by September. This high-conviction approach, while rewarding, carries risks, especially for retail investors.
In response, regulators are targeting sales practices that contribute to this high-risk model, proposing the strictest codes of conduct ever to restrict misleading marketing and promotions based on past performance. The reforms also aim to mitigate the 'star fund manager' phenomenon, discouraging excessive promotion of personalities that might attract rapid inflows of capital. Compensation for fund managers is also being addressed, with draft guidelines linking bonuses to three-year performance and requiring deferred investments in their own funds.
During the first half of the current year, this AI frenzy created a stark divide in mutual fund returns, with top AI-focused funds outperforming traditional portfolios by more than 200 percentage points. The tech-heavy STAR 50 Index surged 64%, as AI euphoria reshaped market hierarchies and the electronics sector eclipsed banks in total capitalization.