Major China-focused hedge funds show biggest net outflows in 15 years

Major China-focused hedge funds show biggest net outflows in 15 years

by Summer Zhen

HONG KONG (Reuters) – Hedge funds investing in Greater China are showing their largest net fund outflows in at least 15 years, according to data for the first seven months of 2022, as investors cut their exposure to Chinese assets and wait for more clarity on policy.

For the January-July period, Greater China-focused hedge funds reported $5.6 billion in outflows and $2.01 billion in outflows, according to Eurekahedge data from With Intelligence.

The net outflows of $3.6 billion to date are greater than any full-year outflows since the hedge fund database began compiling such data in 2008. It is also a reflection of the $1.8 billion net inflows in 2021 and 8.7 billion dollars in 2020, when investors started a bullish race in Chinese markets.

Market watchers and analysts say global investors remain eager to do business with China, the world’s second-largest economy, and its high-growth companies, which is why this year’s paybacks have been moderate even after unexpected events like the war between Russia and Ukraine. , and sell-offs of Chinese stocks listed in the United States, and the long-term shutdowns of epidemics in major Chinese cities.

However, new provisions have remained stagnant and it may take longer for investors to do their due diligence on managers, they say, while policy uncertainty surrounds the Chinese Communist Party’s congress, a once-in-five-year gathering that begins on October 16.

“The inflows in 2022 are much lower compared to the past few years,” Tai Li, a hedge fund analyst at With Intelligence, told Reuters.

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“Investors remain cautious given the risk of a continued lockdown as local governments try to stem virus outbreaks ahead of the 20th Communist Party Congress.”

Across strategies, managers pursuing fixed income and long short equity strategies recorded the largest outflows amid a challenging macroeconomic environment, while arbitrage funds continued to attract inflows in 2022.

In a survey by Bank of America Securities in September, 53% of nearly 120 Hong Kong-based investors surveyed said they plan to “do nothing” between now and the mid-October conference. Only 42% said they plan to add China to the sites.

โ€œSentiment is divided, and most institutional investors are still taking a wait-and-see approach for now,โ€ said Zhiwei Zhang, president and chief economist at Hong Kong-based Pinpoint Asset Management, while highlighting that Chinese stock valuations remain. Attractive to long-term investors.

Jason Bidcock, chief investment officer at Jupiter Asset Management, said in July that the fund had cut its exposure to China to zero for the ยฃ1 billion ($1.15 billion) Jupiter Asian Income Fund.

However, the California Teachers’ Retirement System (CalSTRS) published a request for proposal in August to search for a China-focused equity manager for the first time.

(dollar = 0.8723 pounds)

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