The Core Issues of Open-Ended Funds in China: Conflicts of Interest and Ownership Structure

Open-ended funds have been the subject of the important and ongoing reforms in China. The conflict of interest problem, facing the shareholders, the board of directors and the depositary, puts its roots in the ownership structure of fund management companies. This paper, firstly, argues that securities companies, trust companies and banks should not be the holding shareholders of the fund management companies, that is, the proportion of shares held by them should be limited. Secondly, the empirical findings are consistent with the view that ownership dispersion yields ownership concentration as ownership dispersion helps to minimize problems with conflicts of interest in most cases.