Chinese funds of hedge funds returned nearly 12 percent on average last year, beating all but one of nine other investment categories tracked by Beijing-based Ge Shang Wealth Advisory Ltd. The Shanghai Composite Index rose 6.6 percent during the period.
Given that funds of funds have a relatively short history in China, it’s unclear how they might perform in more turbulent environments. But proponents are betting the products will offer some protection against the kind of stock-market volatility that rocked the country three years ago and has threatened to resurface in recent weeks amid deepening trade tensions with the U.S.
In this environment, “holding long positions on a single asset no longer works,” said Xu Yisheng, who manages 4 billion yuan in funds of hedge funds at Beijing-based New Momentum Asset Management. “We’ve signed up quite a few new institutional clients this year and can feel that demand is increasing.”
That’s partly because the bursting of China’s 2015 equity bubble has convinced many of the country’s wealthy investors to settle for more sustainable returns.
“People used to routinely expect to double their money,” said Zhang Chengming, chief investment officer of Guorong Securities Co.’s fund of fund operations. “They’ve become a lot more rational after the stocks rout in 2015. Nowadays 10 percent to 15 percent can make them very happy.”
This article was provided by Bloomberg News.