Hedge funds in China outshone their overseas rivals in 2020 as the country’s economy staged an advance recovery from the COVID-19 pandemic.
The almost 15,000 funds provided by Chinese managers posted average returns of 30% in 2020, according to data from Shenzhen PaiPaiWang Investment & Management Co.. That compares to an average of 12% for hedge funds internationally last year.
Macro funds in China posted the best performance, with an average return of 41%, as compared to a global average of 10%.
This bumper performance enabled Chinese hedge funds to add a record 1.3 trillion yuan (approx. USD$201 billion) in assets in 2020.
Analysts say the strong performance of Chinese hedge funds has put a brake on efforts by global funds to crack China’s 3.8 trillion yuan hedge fund market, as their comparatively small size leaves them subject to heavier regulatory constraints.
Out of 32 foreign players that are licensed to operate in China’s hedge fund market only three have over 2 billion yuan in onshore private fund operations – the threshold that enables them to partake of the interbank bond market.
The small size of foreign hedge funds in China also makes it harder for them to obtain distribution deals from banks that are major source of new clients, or access over-the-counter options due to their inability to satisfy the requirements of Chinese brokerages for assets under management.