China hedge funds brace for upheaval from tough new rules
By Samuel Shen and Selena Li
July 22 (Reuters) -China's $715 billion hedge fund industry is facing renewed pressure from stringent regulations coming into effect next month, forcing some investment firms to seek fresh capital from white knights or even shut shop.
New guidelines for the fragmented industry from Aug. 1 will impose higher asset thresholds for funds to operate, and also stricter norms for their investments and marketing.
These rules would come after China's regulators cracked down on computer-driven 'quant funds' this year as part of Beijing's tighter supervision of the financial industry.
Zhang Kaihua, founder of Nanjing-based HuYang Private Fund Co, is selling up to 6.3% of his company to boost capital.
"Higher compliance rules are making operations more and more costly," said Zhang, who is luring new partners to keep the business afloat. "We're struggling as a small asset manager."
The new rules require a fund to have a minimum 10 million yuan ($1.38 million) to be set up, and assets of at least 5 million yuan to operate, posing a challenge to many managers of tailor-made, single-account products. Pitches to prospective investors via live-streaming and other public platforms are also being disallowed.
Hedge funds in China refer to loosely regulated private funds that raise money from institutions or wealthy individuals.
Nearly 300 such funds out of the more than 8,000 in China have already terminated business so far this year, data from industry body Asset Management Association of China (AMAC) showed, as a flagging stock market, sluggish economy and weak consumer sentiment take their toll.
FINAL STRAW
The upcoming rules were the final straw for some.
Chun Xu, fund manager at JSVest Shanghai Ltd, shut his fund house earlier this year, believing he does not stand a chance in an environment where helping the rich get wealthier is frowned upon. Xu is contemplating moving into the coffee and tea retailing business.
Tighter rules are "sapping market liquidity being provided by hedge funds," Xu said. "Regulators are prioritising political correctness over market efficiency."
AMAC, which is supervised by the China Securities Regulatory Commission (CSRC), said the new rules are aimed at promoting the healthy development of a crowded industry where some players are too small and loosely managed.
Some funds "naturally shut down due to their lack of investment capabilities, low level of compliance and risk control, which is a normal reflection of survival of the fittest," AMAC said in a statement to Reuters, vowing continued support to the broad private fund sector.
The tightening of regulations on China's 5.2 trillion yuan ($715 billion) hedge fund sector comes as President Xi Jinping seeks to foster a leaner and cleaner financial industry able to support his strategic goals of tech supremacy and common prosperity.
"The industry is experiencing its darkest hour," said Hu Bo, head of investment at Shanghai-based hedge fund manager Professional Fund. "From investment to fundraising and marketing, rules are being tightened."
The new guidelines also cap a fund's exposure to a single asset at 25%, potentially upending many funds' business models of making outsized bets on certain stocks, fund managers say.
A further blow to the industry would come if curbs were to be imposed on sales of hedge funds via banks - a key distribution channel for some asset managers - to prevent major losses for bank customers.
China's banking regulator launched a consultation in early June, seeking feedback on whether the channel should remain open for hedge funds, two sources with direct knowledge told Reuters.
China's National Financial Regulatory Administration did not reply to Reuters' request for comment.
'CHINA'S DALIO OR SOROS'
Some predict ever-tighter rules pose a threat to the existence of thousands of hedge funds, an overwhelming majority of whom are small-sized.
More than 80% of hedge fund companies in China manage less than 500 million yuan, according to AMAC data. Only 91 companies, or 1.1% of the total, manage more than 10 billion yuan.
China's hedge fund market has also attracted global players, including Bridgewater, Winton, Man Group and Two Sigma, who are unlikely to be impacted by the new rules due to their size, deep pockets and strict internal controls.
The government does not welcome "China's Dalio or Soros", said Huang Wei, founder of Miniu Investment, referring to billionaire U.S. hedge fund manager Ray Dalio, and financier George Soros.
But some big hedge fund managers said the tighter rules are good for the industry.
"If you have a fund that cannot maintain 5 million yuan in size, I don't think the business will survive," said Liam Zhou, founder of Shanghai-based Minority Asset Management Co, which manages more than 6 billion yuan.
($1 = 7.2702 Chinese yuan renminbi)
Additional reporting by Jason Xue; Editing by Muralikumar Anantharaman
संबंधित परिसंपत्तियाँ
ताजातरीन समाचार
अस्वीकरण: XM Group के सत्व केवल निष्पादन वाली सेवा और हमारी ऑनलाइन व्यापार सुविधा में पहुँच प्रदान करते हैं, ताकि व्यक्ति वेबसाइट पर या उसके जरिए उपलब्ध सामग्री को देख सके और/या उसका उपयोग कर सके। इसका प्रयोजन इसे बदलना या विस्तार देना नहीं है, न ही वह इसे बदलता या विस्तार देता है। इस तरह की पहुँच हमेशा ही निम्नलिखित के अधीन रहेगी: (1) नियम और शर्तें; (2) जोखिम चेतावनियाँ; और (3) पूर्ण अस्वीकरण। इसलिए ऐसी जानकारी सामान्य सूचना से अधिक कुछ भी नहीं है। विशेष रूप से, कृपया इससे अवगत रहें कि हमारी ऑनलाइन व्यापार सुविधा की सामग्रियाँ न तो किसी चीज का अनुरोध करती हैं, न ही वित्तीय बाजारों में प्रवेश करने की पेशकश ही करती हैं। किसी भी वित्तीय बाजार में व्यापार करने के साथ आपकी पूँजी को उल्लेखनीय जोखिम है।
हमारी ऑनलाइन व्यापार सुविधा में प्रकाशित सभी सामग्रियाँ शैक्षणिक/सूचनात्मक प्रयोजनों मात्र के लिए हैं, और इनमें वित्तीय, निवेश टैक्स या व्यापार सलाह और सुझाव नहीं हैं - न ही ऐसा समझना चाहिए कि इनमें ये सब हैं; न ही इनमें हमारी व्यापार कीमतों का अभिलेख है; न ही इनमें किसी वित्तीय उपकरण में लेन-देन करने का निमंत्रण या अनुरोध है; न ही ये आपको अवांछित वित्तयी प्रोमोशन पेश करती हैं।
इस वेबसाइट में मौजूद कोई भी तृतीय पक्षीय सामग्री, तथा XM द्वारा तैयार की गई सामग्रियाँ, जैसे: अभिप्राय, समाचार, अनुसंधान, विश्लेषण, कीमतें और अन्य सूचनाएँ या तृतीय पक्षों की साइटों के लिंक, "जैसा-है-वैसा" के आधार पर बाजार के बारे में सामान्य टिप्पणी के रूप में उपलब्ध कराई गई हैं, और वे निवेश हेतु सलाह नहीं हैं। जिस हद तक कीसी सामग्री को निवेश अनुसंधान मान लिया जाता है, उस हद तक आपको ध्यान में रखना होगा और इसे स्वीकार करना होगा कि वह सामग्री इस उद्देश्य से और निवेश अनुसंधान की स्वतंत्रता को बढ़ावा देने के लिए कानूनी आवश्यकताओं के मुताबिक, तैयार नहीं की गई है, और इसलिए उसे प्रासंगिक कानूनों और विनियमों के तहत विपणन संप्रेषण माना जाएगा। कृपया सुनिश्चित करें कि आपने गैर-आश्रित निवेश के बारे में हमारी सूचना को पढ़ और समझ लिया है। पीछे दी गई जानकारी के बारे में अनुसंधान और जोखिम चेतावनी यहाँ उपलब्ध है।
