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Thousands of small funds to close in China hedge fund shakeup

Thousands of smaller China-based hedge fund managers are expected to shut up shop while their larger peers will be subject to stricter regulations as part of a shake-up of the RMB6tn ($832bn) sector, according to a report by Bloomberg.

The report cites data from Shanghai Suntime Information Technology Co as revealing that draft rules that will impose a RMB10m asset minimum on hedge funds, will effectively force the liquidation of the more than a third of the investment vehicles tracked by the firm. The draft rules, which could take effect effect as soon as September will also cap leverage levels and the size of investments hedge funds can make in single securities.

Almost 35,000 products, or about 37% of all existing hedge funds, currently have less than half of the RMB10m minimum asset requirement, according to Shanghai Suntime.

China’s hedge fund industry has grown sevenfold in the past decade, according to Bloomberg, and while smaller funds often top performance rankings, they employ high levels of leverage and can experience extreme volatility.

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