| Over the past 12 years since the birth of "new" securities investment funds in 1998, China's fund market has witnessed a fast growth in terms of its size and the varieties and quantities of the funds. Fund investment has become a basic asset management tool for the general public, in particular the middle aged and young generation to share China's rapid economic growth. With the dynamic development of the fund market, the establishment and improvement of the basic system of China's fund sector have also made remarkable progress, in which "Interim Measures for Securities Investment Fund Management" and "PRC Securities Investment Fund Law" established the regulatory framework of China's securities investment funds with trust as the core while "Governance Rules of Securities Investment Fund Management Companies (Trial)" identified a series of rules for the corporate governance of fund management companies. However in practice, the system and mechanism of fund governance based on the protection of fund holders'legal interests have not been established and improved in China currently and the existing institutional arrangements of fund governance are not implemented effectively, which fails to reach the fundamental goal of protecting the legitimate interests of unit holders.China's securities investment funds are essentially institutional arrangements on a contractual basis based on fiduciary duty. Looking forward, the further development of the fund market undoubtedly requires the increasing growth of per capita disposable income and residents'wealth, but how to improve the level of institutional arrangements of fund governance in order to gain the trust of investors is also an important requisite. Only a deep insight into the objective laws of the development and operation of the fund sector and steady solution of material problems thereof can stimulate the investment passion of the general public.This Article starts with the summarization of the existing disharmonious phenomena in China's current fund market and introduces from the practical disharmony a full rethink on its origins—the system design of powers and responsibilities between fund investors and fund managers, i.e. fund governance. The framework of this Article, in two dimensions, carries out a systematic and detailed research on the fund governance of contractual-type funds. In the longitudinal dimension, in addition to qualitative summary of the issues, it also carries out a quantitative measurement of the positive and negative effect that various aspects of the existing fund institutional arrangements imposed on the investment management efficiency and performance; then mainly studies on mutual articulation, interweaving, gaming and functioning among the interests implementation mechanism of the related parties in fund's basic system design, and eventually transfers to generate a series of intrinsic theoretical mechanism with macro and micro economic effects. Advice from others may help one overcome one's shortcomings. From the horizontal perspective, this Article studies the historical trace of the development of the world main fund governance system, the effect of the past significant changes and the hidden reasons, current features, advantages and disadvantages between them. At last, this Article systematically reviews the existing laws and regulations of China's fund governance and puts forward the proposals to improve and reconstruct the reform path and design of steps of China's existing fund governance structure.As for the measurement of the positive and negative effect that China's existing fund institutional arrangements imposed on the investment management efficiency and performance, this Article, with the sample of the open data of China's all fund companies since 2000 and research date for those fund companies in Shanghai, respectively using pool (OLS),one-way fixed effects panel regression,Ordered Logit Regression,Component Analysis to build up multiple models, carries out measurement test on the relationship between fund governance structure and investment management performance, the relationship between fund investment turnover rate and fund governance structure, and fund fee arrangement ("soft dollar") as well as inspects the multi-effect of China's fund governance structure on the process and results of the operation of funds from the positive effect perspective. As to the measurement test on the relationship between fund investment turnover rate and fund governance structure, the relationship between fund performance and fund governance structure, fund modified Sharp ratio rankings and fund governance structure, circumstances that fail to show the measurement effect of original hypothesis arise, which reflects that China's fund governance level is not so satisfactory. All of these provide a logical starting point for further theoretical excavation and analysis on the intrinsic motivation of China's unsatisfactory fund governance level and put forward proposals as well.In respect of the intrinsic mechanism of the implementation mechanism through interest game of the related parties in fund basic system design, this Article reviews and clarifies the stakeholders on the important node of the fund governance structure. Regarding fund as a multi-level commission system, with the theory of game as the theoretical tool, this Article analyzes in detail the profound intrinsic mechanism resulting from various maladies relating to the running status of the main game levels. The key discoveries are as follows:1. under the existing fixed remuneration system, in case of either single period or dynamic multi-period game, independent directors are easy to fall into the circle of "no motivation to work hard-shareholders continue to invite-independent directors accept the engagement"; 2. for fund custodians and fund managers, to design such four cases as complete static information, complete dynamic information, incomplete static information, incomplete dynamic information and to analyze in detail each case, it turns out that the game equilibrium strategy under each case is that fund custodians not only have no motivation to inspect fund managers, but also have internal mechanism of deliberately meeting the requirements of fund managers and even collusion motivation with fund managers; 3. for the relations of the shareholders of fund managers, senior officers of fund managers and the core team members represented by portfolio managers, it analyses and points out that there exist obvious fragmentations and dislocations between the income function design of the senior officers of fund managers and performance incentive function design of portfolio managers, performance incentive function design of portfolio managers and the objectives of fund investors, which constitutes an important inner reason that the effect of China's fund governance is not satisfactory. According to the results of analysis of current maladies, this Article reconstructs game relations and adjusts the game rules in accordance with new fund governance structure design ideas and also uses the method of game theory to demonstrate that the new fund governance structure design can effectively improve the main underlying defects between the key governance nodes of the existing governance structure, making various parties to the game change their behaviors to reach the goal of enhancing the interests of fund governance. The conclusions proved are: 1. in the framework of further improvement of system that "paying fixed remuneration periodically and paying fund units after the expiration of the contract", "fixed remunerations+fund units" and the interest representatives of investors making direct decision on independent directors'total remuneration size, game results, whether static or dynamic, show the cumulative improvement of the best efforts level of independent directors and the influencing factors of the latter two cases are less assumptions than the former system and making incentives mechanism design for independent directors more simple and efficient; 2. improving the existing incentive and restraint system of fund custody market to make custodians have inner motivation to monitor managers carefully; 3. for the game among shareholders of fund managers-senior officers of fund managers-core team members, the writer introduces fund investors to replace shareholders of fund managers, and thus by means of "dual fund investor model" constructs target revenue function to make comprehensive measurement of the investment income of fund investors, and designs the income function of fund managers centering on "comprehensive excess rate of return" of the investment of fund investors, and updates the incentive function of portfolio managers and proves the intrinsic mechanism that can generate various governance interests under the new game structure and rules.In respect of studies on the historical trace of the development of the world main fund governance system, the effect of the past significant changes and the hidden reasons, current features, advantages and disadvantages, the writer chooses five developed and developing countries (or regions) as representatives from the world's famous economic entities which use the contractual-type as their main governance system for fund markets and compares these markets with social, cultural and legal system and historical trace of the development of basic capital market relating to fund governance institutional arrangement, with the laws and features of regulatory system relating to fund governance structure, as well as the framework and respective characteristics of the current existing fund governance structure. From these sample countries the writer reaches three regular conclusions which have certain reference value for China as follows:first, it must clarify the nature of relationship between parties to a contract from the legal source. The legal basis on which common law system countries' contractual-type fund governance is relied is generally different from the understanding and structure of trust of civil law system, as a result civil law system countries must make a lot of reform within their legal framework when introducing trust law in order to promote the integration of the trust and enacted laws. Otherwise, legal "crack" will easily turn up; secondly, in respect of protecting the interests of fund investors, all countries make it as the core guiding ideology when designing fund governance structure and operation mechanism and try everything to carry out in practice. In this regard, the evolution of the fund governance characteristics in Japan, Germany, Hong Kong and India shows the historical gradual process of the gradual improvement of investors'interests protection mechanism. Especially in Hong Kong and India, the protection of the rights of investors is carried out in practice to the maximum extent; thirdly, giving full play to the subjective initiative of parties, under the rule of law instead of the rule of man, which is conducive to the transformation of government functions and makes human resources of government authorities free from being weighed down with work, is obviously the development direction for all countries to enhance fund governance level and to improve the regulatory efficiency of fund governance.After the above positive and theoretical research, in the end, this Article clarifies, combining with the reality, the actual nature, feature, cause of operational maladies in various levels of China's fund governance regarding the general meeting of fund holders, shareholders of fund managers, senior officers, core team members, independent directors, custodians, information disclosure and relevant laws and regulations and afterwards puts forward proposals to optimize fund governance from three major aspects. Of those proposals, the writer puts forth much force on the following:proposal of an idea to improve the two levels of protection mechanism for the interests of China's fund holders and its advantages and disadvantages, creating a complete set of system and operational mechanism for the council of the general meeting of fund investors, reform of the existing incentive mechanism of managers, reform of the existing incentive model and mechanism of senior officers of fund managers, launch of the specific system design of "fund holding plan" and "share holding plan" of funds, reform of access of custodians, information access and decision-maker of custody fees, payment system, appointment of independent directors and terms of office, incentive and restraint mechanism and improvement of "information disclosure" mechanism which affects China's optimization of fund governance system, etc. |
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