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
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
