The recent reform of compensation systems in the fund industry has drawn significant market attention. Under new guidelines from the Asset Management Association of China (AMAC), fund managers whose products underperform their benchmarks by more than 10 percentage points over three years—while also posting negative fund profitability—will face a mandatory performance pay cut of at least 30%. Additionally, the rules require fund firms to apply weighted assessments based on fund size and management tenure for managers overseeing multiple products, excluding funds managed for less than a year.
Wind data shows that, as of December 10, among 9,430 funds with three-year performance records, 1,615 underperformed their benchmarks by over 10 percentage points, with 56 lagging by more than 50 percentage points. GF High-end Manufacturing A, Founder Fubon Innovation Power A, and Zhejiang Shang Zhi Xuan Economic Momentum A were the worst performers, trailing their benchmarks by 82.38%, 75.34%, and 69.84%, respectively.
Against this backdrop, the three-year performance of veteran fund managers has come under scrutiny. PengHua Fund’s Chen Xuanmiao, in particular, has struggled with multiple products.
According to Wind, as of December 10, all five of Chen’s funds posted negative excess returns relative to their benchmarks over the past three years, with significant underperformance: - PengHua匠芯精选A lagged its benchmark by 28%. - PengHua远见回报三年持有 underperformed by 24.53%. - PengHua外延成长 trailed by 22.59%. - PengHua价值成长 fell short by 20.80%. - PengHua优势企业 underperformed by 12.63%.
These funds also experienced notable drawdowns during the period, ranging between 21% and 30%.
Notably, Chen only began managing PengHua匠芯精选A in March 2023, meaning its three-year record includes periods under former managers Lang Chao and Wang Zonghe.
A portfolio analysis reveals high overlap in the top 10 holdings across Chen’s five funds, with heavy exposure to consumer, healthcare, and undervalued cyclical sectors. Gree Electric Appliances, Humanwell Healthcare, Kweichow Moutai, Mindray Medical, Tencent Holdings, and Kelun Pharmaceutical appeared frequently among the top holdings.
In PengHua价值成长’s Q3 2025 report, Chen acknowledged that the market had strongly favored growth sectors like AI, robotics, and resource stocks, while her portfolio remained concentrated in consumer, healthcare, and low-valuation cyclical stocks with minimal adjustments. This adherence to her investment style, amid a prolonged growth-dominated market, likely contributed to the significant underperformance.
Looking ahead, the industry is undergoing a profound transformation as performance pay becomes tightly linked to benchmark-relative returns rather than just scale and fees. This shift signals a new era prioritizing long-term investment discipline, sustainable performance, and robust research capabilities.
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