Outsized returns from Chinese hedge funds are enabling them to dominate foreign competitors in the mainland after registering a record year for asset growth in 2020.
Strong returns fuelled asset growth amongst mainland China’s 15,000 funds which posted 30 percent returns on average last year, according to data from Shenzhen PaiPaiWang Investment & Management Co, more than doubling the global average of 12 percent.
Macro funds were the best performer with an average return of 41 percent, quadrupling the global average of 10 percent.
Eclipsing Foreigners
On the back of such strong performance, Chinese hedge funds managed to add a record 1.3 trillion yuan ($200 billion) in assets last year, bringing the total market size to 3.8 trillion yuan.
By comparison, only three of the 32 foreign firms with a mainland hedge fund license – UBS, D.E. Shaw & Co and Winton Group – have more than 2 billion yuan in assets after Chinese authorities opened the market four years ago.
Performance aside, foreign firms also have other issues that could hinder asset growth, most notably their lacking size in the onshore market which can prevent winning distribution deals from banks or accessing markets such as over-the-counter options.
