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Investor retreat leaves China hedge funds in disarray

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Offshore China hedge funds that target investments in the world’s second-largest economy, are feeling the pinch as foreign investors lose interest in investing in the country’s faltering economy, according to a report by Bloomberg.

The report cites data from Preqin as showing that the number of active China-focused hedge funds has slipped for the first time since at least 2012, with only five new funds launched this year, as of June, while another 18 funds were liquidated.

As recently as 2021, offshore China hedge funds accounted for almost half of all new new funds in Asia as investors looked to cash in on the previously booming Chinese economy. Investor interest has waned though, as Beijing’s crack down on private companies operating in several industries including home-tutoring and e-commerce and raising geopolitical tensions with the US have hit returns.

Funds to have shut up shop as a result include Dantai Capital’s flagship Greater China hedge, and an Asia hedge fund focused on Greater China managed by Tiger Management-backed Yulan Capital Management.

The report cites data from Eurekahedge meanwhile, as revealing that China-focused hedge funds, and stock pickers in particular, are facing an unprecedented second consecutive year of losses. Some 62% of China hedge funds have failed to make money so far this year after more than two-thirds lost money in 2022.

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