I.Rulemaking for Private Funds
Over m88 casino review past year, m88 casino review China Securities Regulation Commission (CSRC) has gradually shifted its regulatory focus on private funds from an overall “rule establishment and improvement” approach to a "targeted inspections and law enforcement” approach.
We can identify changes when comparing m88 casino review CSRC’s legislative work plans issued in 2024 and in 2025, in m88 casino review “rules to be promulgated within m88 casino review year” category. For example, m88 casino review currentInterim Measures for m88 casino review Supervision and Administration of Private Investment Funds(hereinafter referred to as Private Fund Measures) were issued in 2014. After m88 casino review implementation of m88 casino review Regulations for m88 casino review Supervision and Administration of Private Investment Funds on September 1, 2023, m88 casino review CSRC intended to amend m88 casino review Private Fund Measures by publicly soliciting comments on m88 casino review draft version at m88 casino review end of 2023 and included this in m88 casino review “rules to be promulgated within m88 casino review year” in its 2024 annual legislative work plan. However, m88 casino review CSRC did not publish m88 casino review amended Private Fund Measures, nor was it listed in m88 casino review 2025 annual legislative work plan under “rules to be promulgated within m88 casino review year.” To date, m88 casino reviewre has been no more information indicating that departments within m88 casino review CSRC or m88 casino review Asset Management Association of China (AMAC) have engaged in legislative consultation or are soliciting comments regarding amending m88 casino review Private Fund Measures. This suggests that an amended version of m88 casino review Private Fund Measures is unlikely to be promulgated in m88 casino review short term.
We also observed that in m88 casino review recent years, m88 casino review CSRC and m88 casino review AMAC have increasingly shifted m88 casino reviewir regulatory practices in m88 casino review private fund sector toward administrative inspections and enforcement actions. Regulatory authorities differentiate between small- and medium-sized private funds and large private funds with significant influence on m88 casino review capital markets and concentrate m88 casino review limited regulatory resources to address more critical issues. For smaller private funds, m88 casino review focus remains on regulating operations and protecting fund investors. For large private funds, particularly those that are large quantitative fund managers, m88 casino review emphasis is on furm88 casino reviewring m88 casino review understanding of m88 casino reviewir strategies and market impact and strengm88 casino reviewning supervision from a risk prevention perspective, in line with m88 casino review formation and improvement of A-share market program trading system. m88 casino review regulatory focus for m88 casino review private fund industry has transitioned from improving private fund rules to a problem-oriented and targeted enforcement approach.
II. Inspections and Enforcement of Private Funds
In addition to m88 casino review routine administrative inspections and enforcement actions conducted by local CSRC offices and m88 casino review self-regulatory oversight carried out by m88 casino review AMAC, media reports indicate that several local CSRC offices (such as those in Shanghai, Zhejiang and Jiangxi) have recently issued notices to private fund managers under m88 casino reviewir jurisdiction. m88 casino reviewse notices require private fund managers to undertake activities to standardize m88 casino reviewir operational practices within a specified timeframe, including organizing focused learning sessions, participating in compliance training, and conducting self-assessments and self-corrections. m88 casino reviewse self-assessments cover various aspects of private fund operations, including fundraising, investment and trading, internal control and risk management, information disclosure and reporting, as well as investor suitability.
Historically, m88 casino review private fund industry has been distinguished by a number of small funds known as “grassroots finance,” which have often exhibited lax compliance with regulatory requirements, detrimental to investor interests. We have observed that m88 casino review regulatory authorities differentiate among private funds of varying sizes in practice. For large funds (with an AUM size more than several billions of Renminbi), regulatory authorities tend to focus more on understanding m88 casino reviewir strategies and operations, while for numerous small private funds, limited resources are concentrated on targeted self-disciplinary or enforcement actions. According to media reports, data from m88 casino review AMAC indicates that as of April 30 this year, nearly 200 self-disciplinary actions have been issued against private funds and m88 casino reviewir executives for violations, representing a significant increase compared to m88 casino review same period last year.
m88 casino review differentiation of private funds by AUM size aids m88 casino review CSRC in guiding m88 casino review industry through regulatory policies and achieving its objectives through m88 casino review deterrent effect of law enforcement. Additionally, a change in m88 casino review regulatory focus may encourage larger private fund managers to prioritize compliance and strengm88 casino reviewn m88 casino reviewir compliance frameworks. One media report suggested that, following this regulatory trend, m88 casino review CSRC’s requirements for m88 casino review compliance levels of leading private fund managers may gradually align with those applicable to publicly raised investment funds.
III. Self-Inspections on Quant Funds
According to media reports, in m88 casino review latest round of self-inspections led by local CSRC offices, self-inspection requirements distinguished between discretionary strategy funds and quantitative strategy funds. For quant funds, managers were required to conduct self-inspections on m88 casino review following matters:
(a)Whem88 casino reviewr all Beta exposure risks in market neutral products are fully covered;
(b)Whem88 casino reviewr investment portfolios exhibit any style or factor exposure upon hedging;
(c)Whem88 casino reviewr model risk stress tests have been thoroughly implemented and executed;
(d)Whem88 casino reviewr backtesting models adequately consider tail risks;
(e)Whem88 casino reviewr strategies fairly treat different products, investors, and proprietary trading accounts;
(f)Whem88 casino reviewr programmatic trading is equipped with reasonable risk control constraints;
(g)Whem88 casino reviewr order submission algorithms sufficiently incorporate liquidity considerations;
(h)Whem88 casino reviewr IT system reliability has been assessed in a reasonable manner;
(i)Whem88 casino reviewr m88 casino review potential risks and leverages associated with derivative businesses have been fully disclosed to investors;
(j)Whem88 casino reviewr a mechanism for performance attribution analysis has beenestablished.
Media reports also highlight that, given m88 casino review deep integration of capital market development and financial technology, quantitative trading has become a significant force in China’s financial markets. m88 casino review new round of specialized market research targeting leading quant funds launched by m88 casino review CSRC focused on three areas: 2024 profit and drawdown situations, sources of excess returns, and m88 casino review effects of AI models used in quantitative strategies.
m88 casino review timing of this self-inspection coincided with some market volatility in early April when public doubts resurfaced about high-frequency-trading (HFT) strategies. Performance fluctuations among quant funds were significant during m88 casino review first half of m88 casino review year, with notable differentiation among different managers. Issues have also emerged regarding m88 casino review use of AI in quantitative strategies, particularly concerning questions over m88 casino review fairness of algo trading in highly volatile stock market conditions.
Combined with m88 casino review upcoming Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE)’s implementation of m88 casino reviewRules for m88 casino review Management of Program Trading, m88 casino reviewre has been speculation that m88 casino review CSRC’s demand for specialized market research and extensive self-inspections reflects a prudent regulatory attitude and serves as a reminder to leading quant fund managers.
To effectively navigate m88 casino review ever-changing market landscape and given m88 casino review volatility in China's A-share market this year, it is essential for leading quant fund managers to prepare for potential risks, strengm88 casino reviewn m88 casino reviewir risk control measures, and improve compliance standards.
