China has finally ushered in its first official regulated hedge fund.
China has finally ushered in its first official regulated hedge fund. Guotai Junan Securities Co is gearing up to launch with what is expected to be USD45million in seed capital, having gotten regulatory approval from China Securities Regulatory Commission (CSRC); the mainland’s regulatory body. This could be a watershed moment and spark an explosion of hedge funds as managers look to attract assets from China’s burgeoning middle class – it’s already the fourth largest country with respect to the number of millionaires. China’s alternatives market is, however, still in its infancy. Lack of prime brokerages means there’s no way to leverage, whilst the rules on short selling are currently restricted to trading Index Futures via derivatives contracts. Nevertheless, the fact that CSRC has approved Guotai is an encouraging sign. Guotai Junan Asset Management, who will be managing the hedge fund, hope to raise 300million yuan and will hedge using index futures, the firm’s President, Zhang Biao, told Reuters this week. "There’s huge demand for hedge funds in China, with the market awash with cash seeking modest but stable returns,” said Biao, who, given their infancy, compared Chinese hedge funds to “sheep and rabbits”.
