China to Offer First Registered Hedge Fund
September 2, 2010
China is set to offer its first officially registered hedge fund in the wake of new regulations permitting trading in index futures and short selling.
E-Fund Management Co., China’s second largest asset management company with $29.3 billion in assets, says it will invest the money in separately managed accounts but rely on the same strategies as hedge funds.
The fund manager, which will charge “2-20 like” fees has sent its registration statement to the China Securities Regulatory Commission for approval. The 2-20 phrase is shorthand for a formula in which hedge funds collect 2 percent of the assets they managed and 20 percent of the profits they reap.
The new hedge fund will be targeted to China’s growing number of millionaires which reached about 477,400 in 2009 according to a report issued in June by Capgemini and Merrill Lynch.
In July, the China Securities Regulatory Commission said that it would allow separately managed accounts to trade stock index futures based on clients’ needs. It would not regulate the investment strategies or disclosure of the SMAs.
In a statement, E-Fund Management said that its new fund will “seek to hedge market risk through stock index futures and other tools” and will “maximize returns of each unit of risk.”
E-Fund Management won’t be the only hedge fund manager in China for very long. China Southern Fund Management, which has $26.4 billion in assets, said that it will also set up a similar hedge fund and raise money from high-net worth individuals.
