Keep knowledgeable with free updates
Merely signal as much as the Hedge funds myFT Digest — delivered on to your inbox.
Property managed by the Chinese language operations of Bridgewater and Two Sigma surged because the US hedge funds outperformed their native friends in the course of the market turbulence of final 12 months.
Bridgewater China Funding Administration, the native arm of the world’s largest hedge fund, quadrupled its belongings beneath administration to greater than Rmb40bn ($5.6bn) on the finish of final 12 months from two years in the past, whereas Two Sigma China virtually doubled its belongings over the identical interval, based on folks near the businesses.
The inflow of native buyers got here as the worldwide hedge funds reported double-digit returns in one of many world’s worst-performing markets whereas native asset managers struggled to make ends meet.
Bridgewater’s flagship All Climate Technique China Non-public Funding Fund, which targets rich people with a minimal funding of Rmb5mn ($700,000), yielded 10.2 per cent final 12 months, based on a distributor of the fund. Individuals near Two Sigma mentioned the quantitative buying and selling large’s three China funds reported a greater than 16 per cent return over the identical interval.
In distinction, the benchmark CSI 300 index fell 11.7 per cent in 2023 as China’s post-pandemic financial restoration struggled to realize traction following an unprecedented real estate meltdown.
Whereas many Chinese language funding corporations sought to emulate Bridgewater’s success by tapping different asset courses reminiscent of commodities and derivatives, they’d restricted success. Public information present China’s 771 domestically owned multi-strategy hedge funds generated a median return of two.8 per cent final 12 months.
The outperformance of the likes of Bridgewater and Two Sigma within the Chinese language market highlights the potential for world asset managers to revenue from the world’s second-largest financial system regardless of its lukewarm development outlook and geopolitical tensions between Beijing and western capitals.
“International hedge funds know methods to navigate a bear market as they’ve been via quite a few ups and downs,” mentioned Zhang Zhongyu, vice-president at Shenzhen Rongzhi Funding Marketing consultant, which opinions native hedge funds. “Most Chinese language funds solely know methods to earn money in a bull market.”
In a roadshow this month with Chinese language buyers, Bridgewater mentioned it beat the native market by diversifying into commodities and bonds whose resilient efficiency helped offset losses in its inventory portfolio, based on minutes of the assembly seen by the Monetary Instances.
Public information present a number of Shanghai- and Shenzhen-listed gold ETFs listed Bridgewater All Climate Technique China Non-public Funding Fund as one of many prime 10 buyers within the first half of final 12 months.
A BCIM govt mentioned within the roadshow that the fund’s commodities funding, led by gold ETFs that generated double-digit returns final 12 months in opposition to a stoop within the fairness market, was the largest contributor to its general efficiency.
Within the meantime, most native asset managers, together with trade heavyweights as soon as important of their western friends, have suffered closely from the market meltdown. Li Bei’s flagship Banxia Macro Fund plunged 20.4 per cent over the previous 12 months. The Shanghai-based hedge fund supervisor is thought for her profitable bets on commodities within the wake of the coronavirus pandemic outbreak and her dismissal final August of overseas buyers as “a bunch of aimless flies” following a pointy sell-off.
Bridgewater China’s sturdy efficiency has prompted the fund to broaden its footprint in one of many world’s largest wealth administration markets simply as different US asset administration giants reminiscent of Vanguard are strolling away.
Public information present BCIM issued a report 56 funding merchandise final 12 months, up from 30 in 2022 and one in 2018, when the agency started enterprise in China.
An official at China Retailers Securities, which handles gross sales of the All Climate Technique funds, mentioned demand was “so sturdy” that solely current shoppers might make further purchases.
“It’s troublesome to search out an funding product that did nicely in a foul market,” mentioned the official.
Regardless of the headway made by hedge fund giants, conventional US asset managers had a tough time determining the Chinese language market. Index fund supervisor Vanguard closed its China workplace final November after its partnership with Jack Ma’s Ant Group fell aside. BlackRock China made losses on all of its eight stock-focused funds final 12 months because the world’s largest asset supervisor struggled to revenue from a market pushed by the whims of presidency coverage.
“Sure funds which have some huge cash and are pretty aggressive can go in and attempt to make some cash inside the China market on a small scale,” mentioned Andrew Collier, an analyst at GlobalSource Companions who advises US buyers on Chinese language funding. “That doesn’t imply different [US] funds with a extra established strategy might comply with swimsuit.”