With mutual fund companies having to adhere to investment mandates as part of the regulatory revamp of the 40 trillion yuan (US$5.9 trillion) industry, Chinese money managers may find it difficult to improve fund performance.

China Asset Management and E Fund Management, the industry’s biggest players, and 10 of their peers recently unveiled separate plans as a response to the new regulatory requirements, pledging to stick to the investment scopes in prospectuses and set better benchmarks for measuring performance.

They were among the first batch of mutual fund firms to respond to guidelines implemented in March by the China Securities Regulatory Commission (CSRC). The document, aimed at improving transparency and industry standards, granted asset-management firms a one-year grace period to make changes.

One of the most direct implications for the industry is to put restraints on the so-called changes in the investment style of some funds found to have invested far beyond their mandates in pursuit of momentum trading or hot bets. That could prevent some fund managers from aggressively chasing technology stocks, which have been leading the rebound in the broader market since the easing of Middle East hostilities. Although this would boost performance, their mandates are to focus on traditional industries.

Meanwhile, some consumer funds, which have been battered by the downturn in the liquor industry, have recently added co-managers who are good at picking tech stocks in a bid to reverse the underperformance.

The Star Market 50 index of leading AI chipmakers on the Shanghai exchange has risen by about 30 per cent this year, while liquor giant Kweichow Mao-tai and peer Wuliangye Yibin have slumped 6 per cent and 22 per cent respectively.