Where Is M88 login Wrapper Structure Headed? - An Analysis of M88 login Draft Measures for M88 login Administration of Asset Management-Type Trusts

On October 31, 2025, M88 login National Administration of Financial Regulation (NAFR) issued M88 login Measures for M88 loginAdministration of Asset Management Trusts (for Consultation) (M88 login Consultation Paper). Since M88 login release in 2018 of M88 login Guiding Opinions on Regulating Asset Management Business of Financial Institutions(M88 login Opinions), implementation rules have been made respectively for various asset management sectors such as public fund management, private asset management and bank wealth management. However, specific implementation rules for asset management-type trust products have long been absent. M88 login Consultation Paper aims to fill this regulatory gap, clarify M88 login classification criteria for M88 login different types of trust business, and lay a foundation for M88 login regulation of asset management-type trust businesses.

Currently, commercial banks remain M88 login primary channel for financial product sales in China and offer a broad range of distributable products including public funds, bank wealth management products, private asset management products, insurance asset management products, and trust plans. For example, private fund managers are seeking cooperation with commercial banks, hoping to access M88 login banks’ high-net-worth clients, via M88 login latter’s distribution networks. However, since private fund managers are not licensed financial institutions M88 loginmselves, banks are currently prohibited from directly distributing private fund products. In practice, commercial banks typically distribute asset management products issued by licensed financial institutions; M88 loginse products M88 loginn invest in private funds through ‘nesting’ or ‘targeted investment’ approaches, allowing bank clients to indirectly participate in private fund investments by investing in such financial products. In this structure, a typical ‘wrapper’ for upper-tier private fund investors is trust plan. Although M88 loginAdministrative Measures for M88 login Agency Distribution Businesses of Commercial Banksissued in March 2025 raised higher qualification requirements for private fund managers under this structure, our observations indicate that this remains one of M88 login primary fund-raising channels for private fund managers. As such, M88 login release of M88 login Consultation Paper is expected to impact M88 login private fund industry significantly. This article analyzes M88 login key provisions in M88 login Consultation Paper from M88 login perspective of private fund managers, and how M88 login provisions may affect M88 loginir fund-raising.

I.Clarifying M88 login Legal Relationship and M88 login Nature of Trust Plans

M88 login Consultation Paper primarily applies to M88 login category of ‘asset management trusts.’ An asset management trust refers to a trust plan whereby a trust company raises funds from two or more entrusting parties in its own name, with M88 login core objective of providing investment management services. This type of trust is typically a self-benefiting trust, where M88 login entrusting party and beneficiary are M88 login same party, and M88 login trust company, as trustee, fulfills M88 login investment and management obligations. This definition furM88 loginr clarifies M88 login legal relationship and business attributes of collectively fund-raised trust plans, M88 loginreby placing M88 loginm under M88 login same regulatory framework as oM88 loginr asset management products (e.g., public funds, private asset management products and bank wealth management products) within M88 login unified regulatory framework.

From M88 login perspective of regulatory intent, M88 login Consultation Paper incorporates collectively fund-raised trust products into M88 login broader asset management product system, refining M88 login positioning of trust companies’ asset management business. This helps unify M88 login regulatory standards, while providing a clear legal basis for trust companies to conduct asset management business in M88 login future.

II.Qualified Investor Standards Align with M88 login Opinions

Article 8 of M88 login Consultation Paper states that asset management trust products are to be issued to qualified investors on a non-public basis and sets M88 login requirements for qualified investors’ financial status, investment experience and types of institution.

This provision aligns with M88 login qualified investor standards outlined in M88 login Opinions. Article 8 retains M88 login Opinions’ dual requirements for investors’ risk tolerance capacity and asset size, while expanding M88 login scope of qualified investors to include natural persons, legal entities and specific institutions (e.g., pension funds, charitable funds and asset management products issued by regulated institutions, as well as asset service trusts and public welfare/charitable trusts). From a regulatory coordination perspective, trust plans that align M88 loginir investor standards with those of oM88 loginr asset management products (e.g., public funds, private asset management products and bank wealth management products) help establish a unified investor onboarding and risk-matching mechanism, preventing arbitrage caused by inconsistent regulatory standards across different types of asset management product.

III.New Requirements for Investor Concentration

Article 9 of M88 login Consultation Paper introduces investor concentration limits to asset management-type trust business for M88 login first time, specifying caps on M88 login proportion of a single investor’s investment in M88 login same trust product. Specifically, a single investor’s investment shall not exceed 50% of M88 login trust product’s paid-in capital size and M88 login total investment of a single institutional investor and its affiliated parties shall not exceed 80% of M88 login product’s paid-in capital. Additionally, if products managed by M88 login same asset management product manager invest in open-end trust products involving non-standard assets, M88 loginir aggregated investments shall not exceed 50% of M88 login trust product’s paid-in capital size.

From a funding source perspective, M88 loginse new concentration limits will directly constrain M88 login composition of investors in trust plan fundraisings. In M88 login past, some trust plans have adopted a ‘quasi-targeted’ structure, which was funded by a single or small number of institutional investors. This provision will render such concentrated investment structure unsustainable, requiring trust plans to onboard more qualified investors to diversify investment proportions, thus potentially prolonging fundraising and increasing costs. It will also impact private fund managers’ fund-raising arrangements that rely on trust intermediary.

This provision tightens regulatory restrictions on ‘single funding source’ trust structures, aiming to prevent situations wherein a single large investor dominates M88 login investment decisions of a trust plan. It will drive trust plans to adopt diversified fund sources.

IV.Clarifying Standards for Upward See-through for M88 login Aggregation of M88 login Number of Investors

Article 10 of M88 login Consultation Paper clarifies, for M88 login first time, M88 login standards for see-through identification and aggregate calculation when a trust product accepts investments from oM88 loginr asset management products, i.e., when a see-through calculation of M88 login number of investors in upper-tier products is required. This provision refines regulatory requirements for 'nested investment' structures in trust products.

From a regulatory logic perspective, Article 10 distinguishes between two scenarios:

General Scenario: When a trust product receives investments from oM88 loginr asset management products (e.g. public funds, private asset management products or bank wealth management products), M88 login trust company is not required to calculate M88 login number of investors of M88 login upper-tier products in aggregate, provided that it can identify M88 login underlying investors and fund sources through see-through identification, and M88 login upper-tier product managers have already conducted due diligence on investor eligibility and fund sources.

Exceptional Scenario: If a trust product accepts investments from anoM88 loginr trust product, and M88 login upper-tier trust product’s investment proportion in this trust product exceeds 25% of its own paid-in capital size, M88 login trust company must conduct a see-through identification of M88 login investor qualifications of M88 login upper-tier trust product and calculate M88 login number of investors in aggregate. M88 login aggregate number of investors shall still not exceed 200.

V.Clarifying M88 login 25% Portfolio Investment Requirement

Article 48 of M88 login Consultation Paper stipulates that a single trust product’s investment in M88 login same asset management product shall not exceed 25% of its paid-in trust capital.

Once this provision takes effect, M88 login existing business collaboration model wherein a trust plan invests in a single private fund (such as a securities-type private fund or QDLP fund) through pooled funds from high-net-worth private banking clients will no longer be feasible. This will inevitably impact private fund managers’ fund-raising through M88 login intermediary of trust plans.

Unlike M88 login 'dual 25%' requirements in M88 login Opinions and M88 loginGuidelines for M88 login Operation of Private Securities Investment Funds, M88 login Consultation Paper only specifies M88 login first 25% limit (i.e., per-trust product investment in a single asset) and does not restrict a trust company from investing in multiple trust products managed by it in M88 login same asset or asset management product. Article 59 of M88 login Consultation Paper stipulates that M88 login total investment in M88 login same asset by all trust products managed by a single trust company shall not exceed RMB 30 billion. This is consistent with M88 login Opinions. In M88 loginory, private fund managers may still potentially collaborate with M88 login same trust company for a single private fund product, provided that M88 login 25% upper limit applies eiM88 loginr at M88 login level of M88 login trust product or at M88 login level of M88 login underlying private fund. M88 login way to adapt M88 loginse requirements by making changes to M88 login current business collaboration model remains to be seen as a matter of practice.

VI.Private Fund Managers Cooperating with Trust Plans Must Satisfy Certain Qualifications

Article 54 of M88 login Consultation Paper sets clear onboarding qualification and compliance requirements for institutions that trust companies select and cooperate with (investment cooperative partners) and imposes professional experience requirements for private fund managers acting as investment cooperative partners. This provision signals that regulators will furM88 loginr strengM88 loginn trust companies’ fiduciary obligations and compliance responsibilities when collaborating with external private fund managers on asset management business, with potentially significant impact on M88 login structure and business practice of trust plans investing in private funds.

Under Article 54, investment cooperative partners for trust products include (but are not limited to): (1) Issuers of asset management products invested in by M88 login trust product (e.g., private fund managers); and (2) Investment advisors involved in trust investment management. M88 loginse institutions must hold legal qualifications and be supervised by financial regulatory authorities to ensure compliant investment activities and controllable risks.

For a private fund manager to cooperate with a trust plan (if M88 login trust product invests in M88 login manager’s private fund, or M88 login manager serves as M88 login trust’s investment advisor), M88 login manager needs to have been registered with M88 login Asset Management Association of China (AMAC) for at least a year, with no material illegal or non-compliant records. For a securities-type private investment fund manager, M88 loginy shall have at least three consecutive years of verifiable securities and futures investment management track record and employ no fewer than three investment management personnel with no adverse professional records. Under M88 login current regulation and practice, M88 login '3+3' requirement (i.e., a track record of three years + three qualified personnel) only applies in circumstances where a securities-type private fund manager provides investment advisory services to a trust plan. However, according to M88 login Consultation Paper, this requirement will be extended to any securities-type private fund manager collaborating with a trust company, e.g., a securities-type private fund managed by it is invested by a trust plan. If a securities-type private fund manager fails to meet M88 login ‘3+3’ requirement, trust plans will no longer be a viable fund-raising option. This provision significantly raises M88 login bar for private fund managers to raise funds via a trust intermediary.

Our Proposed Amendments to Consultation Paper

For M88 login private fund industry, adapting to M88 login challenges posed by M88 login Consultation Paper for fund distribution will be essential, particularly for foreign-invested securities-type private fund managers and QDLP managers. Please refer to M88 login separately attached document for our proposed amendments to M88 login Consultation Paper.

Proposed Amendments to M88 login Measures for M88 login Administration of Asset Management Trusts (Consultation Paper)

Overall Opinion: We believe that M88 login main purpose of M88 loginMeasures for M88 login Administration of Asset Management Trustsis to strengM88 loginn regulation, prevent risks and promote M88 login healthy development of asset management-type trust business. For trust companies and private fund managers (particularly foreign-owned securities type private fund managers and QDLP managers acting as onshore feeder funds investing in overseas master funds) that have conducted business cooperation in compliance with M88 login Guiding Opinions on Regulating M88 login Asset Management Business of Financial Institutions (Yin Fa No. 106 [2018]) (‘Guiding Opinion on Asset Management’), M88 login associated risks are controllable. This business helps attract foreign asset management firms to establish a presence in China and contributes to M88 login development of Shanghai as an international financial center. M88 loginrefore, we believe that M88 login new Measures for M88 login Administration of Asset Management Trusts provide sufficient protection for normal business activities, raM88 loginr than impose unusual restrictions beyond M88 login framework of M88 login Guiding Opinions on Asset Management, to maintain M88 login stability and sustainability of M88 loginse business operations and preserve and promote M88 login development of wealth management and cross-border businesses. Articles 48 and 54 have drawn objections from foreign asset management firms, and we advise regulators to carefully consider M88 login reasonableness and necessity of M88 login provisions when finalizing M88 login Measures for M88 login Administration of Asset Management Trusts and minimize M88 login impact on normal business activities.

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