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China Hedge,
a leading hedge fund media &
research advisory firm in China,
classified and summarized the
important events which occurred in
the Greater China over the past
year. China Hedge has invited
Greater China hedge fund managers,
China domestic private investment
fund managers, mutual fund
managers, private bankers,
professionals from hedge fund
services companies and providers,
government officials, financial
and hedge fund media, and readers
to select the top 20 events in the
Greater China Hedge Fund Industry
happened last year. Out of the 20
Events, the final “2007 Top 10
Greater China Hedge Fund Events”
will be named accordingly by poll
ranking. The final result will be
a comprehensive industry review
for the overall development of
hedge fund industry in China in
2007. The poll result will be
published at the site of CHINA
HEDGE (http://www.chinahedge.com.cn)
at 15 Jan 2008.
*****Download the Form of Poll
Ranking*****
Candidate events for “2007 Top 10
Greater China Hedge Fund Events”(Ranking
not shown in particular order):
1.
The First
China-focused Hedge Fund IPO
Value Partners Limited, a Hong
Kong-based asset management firm
with core focus in the Greater
China, was listed in Hong Kong on
22nd Nov and is the
first listed China-focused hedge
fund management company in the
world. Over the past 13 years,
asset under management at the
company have risen from the
initial US$3 million to US$5.7
billion as of the end of June.
2.
AUM of China-focused hedge funds
jumps
As the data from Hong Kong
Securities and Futures Commission
(HKSFC), asset under management of
China-focused hedge funds
increased from USD 6.5 billion in
Jan 2007 to USD 10.6 billion in
Jun 2007. According to the survey
by China Hedge, the number of
China-focused hedge funds reached
at least 110 as at the end of the
year with a 30 percent growth rate
compared with last year. Value
Partners has become the second
biggest hedge fund in Asia, after
Japan’s Sparx Group. Prime
Capital is the second largest
Greater China hedge fund.
3.
Mainland hedge fund manager Prime
Capital ranking 25th in
Asia
According to Alpha Magazine, Prime
Capital Management ranked No. 2 in
the Greater China and 25th
biggest Asia hedge fund manager as
at 31st Mar, 2007 with
USD 670 million of assets under
management. However, after
counting their onshore investment
including investment trust
products, legal person shares,
listed A shares and non-listed
assets, their asset size should be
bigger than that of Value
Partners.
4.
More international
hedge funds opening Hong Kong
branch
D.E. Shaw, Chilton,
RAB Capital and Quellos opened
their Hong Kong branch this year
for investment and marketing
business. SAC Capital also
applied for license from the HKSFC.
Citadel expanded its Hong Kong
team, which is bigger
than other top global names
including Stark, Fortress,
Och-Ziff,
Tremont, Permal, HBK, Cheyne,
York, TCI,
Brevan Howard, Eton Park, Polygon,
CQS, D.B. Zwirn & Sandell
etc.
5. New start-up hedge fund raising
USD 1 billion to invest in the
Greater China
Chris Hsu and Frank Qian, former
fund managers of Citadel
Investment, started their hedge
fund business, Hong
Kong-headquartered Abax Global
Capital. Abax had successfully
raised USD 1 billion to invest in
Asia, especially in Greater China
region. Morgan Stanley is a
shareholder of Abax.
6.
Number of global
and Greater China hedge fund’s
mainland offices
reaching 35 and more
There are at least 35 mainland
offices run by global and the
Greater China hedge funds. At the
end of last year, the number was
just at 15 with mainland
background not more than 5. The
increase is due to the fact that
more and more Hong Kong-based
hedge funds setting up their
mainland research offices (mainly
in Shanghai). The other reason is
more and more Chinese mainland
private investment companies (more
in Shenzhen, some in Shanghai)
registered their hedge funds and
set up their offshore headquarters
in Hong Kong to invest in Hong
Kong market and attract global
investors. These domestic offices
carried out both H share and A
share research functions. It is
apparent that Shenzhen is now in
line with Shanghai as a hedge fund
city in mainland China as Shenzhen
can provide a more flexible
commercial and policy environment
for local private investment funds
to develop.
7.
A number of hedge
fund forums held in Shanghai and
Shenzhen
Co-organized by Shorex and China
Hedge, the 1st
Alternative Investment Summit was
held on 2nd June, 2007
in Shanghai. It was the
first-ever event in China focusing
purely on hedge funds and paved
the way for global managers to
connect with Chinese institutional
investors and high net worth
individuals. Meetings like the 1st
Private Investment Fund Summit (21
Century Business Herald), Global
Investment Stage (The Economic
Observer), 2007 China Hedge Fund
Industry Conference (China
International Capital Corp) also
were held in Shenzhen this year.
These conferences has built up the
milestone that China will become
one of the important cities in
hedge fund industry.
8.
China’s first
FX-related global hedge fund
product
ABN Amro issued two
series of FX financial planning
products – Permal Hedge
Fund-Linked Structural Deposit,
which was related with the
performance of Permal Investment
Holdings’ multi-strategies fund of
hedge funds. This is the
first-ever hedge fund related
products to be legally marketed in
mainland
China.
9.
Global hedge funds
seeking opportunities in mainland
More and more global hedge funds
came to mainland China for
mainland office set up, seeking
investment opportunities and
potential clients. They explore
QFII, PE, PIPE investment and even
QDII market. Those active names
include FGG, Stark, Morgan Creek,
Drake, Tremont, Man, Superfund,
Citadel, Chilton, DE Shaw,
Millennium, Och-Ziff,
Andor Capital, Tree Line, Urwick,
Tiger Asia, PMA
and Jayhawk,
etc.
10.
Local China hedge
funds using trust platform to
issue products
Pure Heart, founded by Zhao
Danyang, is the first legal
private investment company
(usually called China version of
hedge fund) in China. Since 2004,
the size of China’s regulated
private investment product has
reached RMB 15 billion with 45
fund companies. The number of
hedge fund products co-issued by
trust companies has been over 60.
Despite the small size compared to
3.1 trillion of local mutual fund
industry, the trust and regulated
platform can enhance the
development of local hedge fund
development.
11.
Legal channels for China local
hedge funds
Domestic
arbitrage or hedge funds,
including Beaf, Fang De, Lishi,
Nan Hua Xiang Tang Wei Ye
established partnership with trust
companies to get legal channel to
market their hedge fund products
in China. By using quantitative
tools, those fund managers trade
arbitrage of ETF, warrant and
share reform, adopt market neutral
strategies and also used event-driven
strategies to manager their
funds. They complete the
development of their own arbitrage
models to trade coming pair
strategy of index futures and
stocks.
12.
Mainland hedge
funds set up offshore vehicles to
invest in Hong Kong
More and more mainland private
investment funds set up offshore
vehicles registered with HKSFC for
investment in the Hong Kong stock
market. There are at least 10
managers to go offshore to set up
hedge funds last year. They grasp
the investment opportunities
between A and H shares. The
limited marketing channels in
local market lead to the increase
in the number of offshore set up.
Most fund manager with mainland
background outperformed other
peers on average. Some got a
return of 100% YTD, and some even
over 200% within a short period of
time since establishment.
13.
China Investment
Corporation to invest in
Blackstone
China’s sovereign wealth fund,
China Investment Corporation,
bought a USD 3 billion stake in
alternative investment company
Blackstone in its IPO. It paved
the way for local institutional
investors to invest in alternative
investments and even in hedge
funds in the future.
14.
Stark Investments
joining hands with China mutual
fund
Stark Investments plans to raise a
USD 5 million Greater China
multi-strategies fund with a China
mutual fund, Bosera Fund
Management Company. The is the
first cooperation case between
global hedge funds and mainland
fund managers, which means Stark
would take an advantage in the
China market. Bosera will be an
investment consultant for Stark
Investments’ H-shares and A-shares
investment activities.
15.
Best performance
achieved by Greater China-focused
hedge funds
Until the end of
Oct, the average return
(non-weighted) of China-focused
hedge funds has been over 60
percent. But most of the names
were down about 10% or even more
at single month in November which
indicated most of them are
long-biased strategies and did not
adopt appropriate risk control
measures and hedging strategies
for their portfolio.
16.
CBRC: Commercial banks’ QDII fund
forbidden to invest in hedge funds
As the code issued by China
Banking Regulatory Commission,
QDII funds launched by domestic
commercial banks cannot invest in
commodity derivatives, hedge
funds, and securities with BBB
ratings or below. This is the
first indication of regulatory
body to prohibit hedge funds in
the agenda. However, the specific
mentioning can also indicate
official has studied hedge funds
extensively and thus can pave the
later opening of hedge fund in
China. There are no clear rules
about hedge funds in the QDII
rules drafted by China Securities
Regulatory Commission and China
Insurance Regulatory Commission.
17.
First batch of
offshore hedge funds issued local
A share products by trust
Value Partners and
UG Funds issued their first China
A share products with Ping An
Trust and Xiamen International
Trust respectively. Value
Partners achieved the accumulated
return at 150.45% (till 17 Dec
2007) for its trust
product since the establishment of
June 2006. This form of fund
raising may be the benchmark for
the later channel for offshore
hedge funds to enter in China
financial markets and manage the
assets of local investors.
18.
Overseas hedge
funds’ private equity investments
in China
Due to limited QFII quota and
attractiveness of the return of
private equity deals in China,
global hedge fund managers are
eyeing to the private equity
investment in China. US hedge
fund manager, JANA Partners won
the bid for 30 percent of equities
of Shenyang Machine Tool Group
Ltd, China’s largest lathe-maker.
D.E. Shaw & Co. paired with
Goldman Sachs bought a minority
stake in Jiangsu Rongsheng Heavy
Industries Group Co for about USD
250 million.
19.
Global hedge funds
opening office in mainland
Chilton Investment opened an
office in Chengdu, a western China
city, and was waiting for approval
for another office in Beijing. APS
Asset Management, a Singapore
hedge fund, established second
China team in Dongguan, Guangdong,
focusing on listed companies in
Guangdong. Morgan Creek, a
US-based fund of hedge funds,
employed Jason Zhang, former
Managing Director of Stanford
Management Company, to open its
Beijing Office and plans to open
offices in Shanghai and Hong Kong
this year.
20.
Local mutual fund
managers leaving for domestic
hedge funds
According to Morningstar’s data,
in the past half year 163 local
mutual fund managers left their
houses, accounting for 41% of the
total number of managers. Most of
them became local private
investment fund managers. For
example, Tian Ronghua, former fund
manager in Changsheng, founded
Shenzhen Wudang Asset Management;
Liang Wentao, former manager of
E-Fund Growth Fund, resigned and
went to Prime Capital; Jiang Hui,
former CIO of ICBC Credit Suisse
Asset Management, now is general
manager and CIO of Shenzhen
Xingshi Investments.
*****Download the Form of Poll
Ranking*****
Finished Poll
Result, please email to
info@chinahedge.com.cn
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