China Foreign Hedge Funds
China Opens Doors for Foreign Hedge Funds to Local InvestorsFollowing up with coverage a couple of months back, China is further opening the door to foreign hedge funds. The government has reportedly allowed foreign hedge funds to reach out to its wealthy citizens to invest overseas. This is one of several moves that suggest China is working to reform its financial system and invite more foreign funds.
China has given foreign hedge funds permission to tap its wealthy citizens inside the country for funds to invest overseas, according to people in the industry.
The move represents another important step by China to open its capital account – a process that involves dismantling regulations separating China from international markets.
The pace of these reforms has picked up over the past year with a flurry of small initiatives, but the hedge fund move would be among the boldest. As well as creating a new channel for domestic capital to flow abroad, it would give Chinese institutions access to alternative investment strategies – from short positions to arbitrage – which they have lacked.
The reform, called the Qualified Domestic Limited Partner programme, invites hedge funds to apply for licenses to register in Shanghai, two people said. One person said that only the world’s biggest hedge funds, with at least $10bn assets under management, would be allowed to participate at first.
Laurie Pinto, chief executive of North Square Blue Oak, a London-based investment bank that focuses on China, said that hedge funds were already queueing up to apply for licenses, even though the programme had not been formally announced. Source