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Monday, February 08, 2021, 13:59
China hedge funds add US$200b, trouncing Wall Street
By Bloomberg
Monday, February 08, 2021, 13:59 By Bloomberg

This undated photo shows a morning view of the Huangpu River in Shanghai. (CHEN ZHONGQIU / CHINA DAILY)

China’s army of tiny hedge funds are pulling further ahead of their better-known foreign competitors with outsized gains helping them attract more assets.

The nearly 15,000 funds offered by Chinese managers returned 30 percent on average last year, with the best-performers surging 10-fold, according to Shenzhen PaiPaiWang Investment & Management Co. That dwarfs the average 12 percent gain for hedge funds globally.

China’s early economic recovery from the pandemic fueled rallies in stocks and commodities, lifting returns across all eight hedge fund strategies tracked by PaiPaiWang. Macro funds, which trade across asset classes, were the best-performer, returning an average 41 percent, compared to the global average of 10 percent.

The nearly 15,000 funds offered by Chinese managers returned 30 percent on average last year, with the best-performers surging 10-fold, according to Shenzhen PaiPaiWang Investment & Management Co. That dwarfs the average 12 percent gain for hedge funds globally

Shenzhen Qianhai Jianhong Times Asset Management added leveraged bets on stocks seen to benefit from the pandemic, such as glove makers and office supply companies shortly after the outbreak, then later made early dives into consumer stocks and vaccine makers as growth started to stabilize, according to China Times. Its Jianhong Absolute Return No. 1 fund ended the year with a 831 percent return, the best among stock funds, according to PaiPaiWang.

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The number of local hedge fund firms with at least 10 billion yuan in assets more than doubled last year to 63, according to Licai.com. Growth is most impressive among quant funds, with the four biggest tripling assets last year, according to Chinafund.

“Money is increasingly gravitating toward the biggest players, with the top 10% soaking up most of the inflows,” said Liu Ke, head of research at Hengtian Wealth Management. “The trend is accelerating.”

While some foreign quant firms are attracting strong inflows with offshore products that invest in China, they are struggling to win recognition onshore as the under-performance of their fundamental-driven strategies last year further erodes the appeal of their already short track-records, according to Qiu Huiming, founder of Shanghai Minghong Investment Management Co.

“Although foreign managers have stronger name recognition globally, the past two years showed that Chinese quant players still have the edge so far,” he said.

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Chinese quants also further honed their machine-learning skills, with such funds tracked by Howbuy Wealth Management Co beating mainstream multi-factor strategies by 12 percentage points.

Minghong’s assets doubled last year to about 60 billion yuan, making it China’s largest quant fund. Its offshore market-neutral product, which also invests in China, returned 32 percent last year, beating the global average of 3.4 percent, according to Eurekahedge.


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