China CSRC Proposes Rules for Private Equity Fund-of-Funds, Exempts One Layer From Investment Tiers

China's move to formalize fund-of-funds rules signals a regulatory push to channel long-term capital into private markets while tightening oversight of layered structures. The exemption from one investment tier reduces stacking risk and could make fund-of-funds vehicles more attractive to institutional allocators. Managers face clearer operational and post-investment tracking obligations, raising compliance costs but improving transparency. The open question is whether the differentiated ratios for long-term capital will meaningfully shift allocation behavior once the consultation closes.