Carrhae Capital, a London-based emerging markets hedge fund, is preparing to launch a $700m long-only strategy that will exclude China entirely – responding to growing demand from US institutional investors seeking to remove Chinese exposure from their portfolios, according to a report by Bloomberg.
The new strategy, set to debut in September, will be carved out from Carrhae’s existing long-only emerging markets vehicle, the Carrhae Capital Long Fund, which currently manages around $2bn, according to people familiar with the matter. A portion of assets will be transitioned into the new fund, with additional capital expected to be raised, the sources said, asking not to be named discussing private details.
Carrhae manages $1.5bn in its flagship long-short hedge fund strategy and has grown total assets to approximately $3.5. Thebn firm declined to comment on the upcoming fund launch.
The move comes as US public pension funds face mounting political pressure to divest Chinese assets, driven by intensifying geopolitical tensions. States including Florida, Texas, Missouri, Indiana, and Oklahoma have passed legislation or issued executive orders requiring divestment of Chinese holdings from state-managed investment pools, prompting a wave of redemptions from China-linked public equities.
Texas, home to the $200 billion Teachers’ Retirement System (TRS), will see new China-related investment restrictions take effect in September. TRS has already exited all public China exposure and earlier this year removed China from its emerging market equity benchmark, citing economic weakness, increased regulation, and political risks.
