Stay informed with free updates
Just sign up for Hedge fund myFT Digest — delivered straight to your inbox.
Assets managed by Bridgewater and Two Sigma's China operations soared as U.S. hedge funds outperformed their domestic counterparts during last year's market turmoil.
Bridgewater China Investment Management, the local arm of the world's largest hedge fund, quadrupled its assets under management to more than 40 billion yuan ($5.6 billion) at the end of last year compared to two years ago, while Two Sigma China has almost doubled its assets. According to people close to the company,
The influx of local investors came as global hedge funds reported double-digit returns in one of the world's worst-performing markets while domestic asset managers struggled to make ends meet.
Bridgewater's flagship fund, All Weather Strategy China Private Investment Fund, targets high-net-worth individuals with a minimum investment of 5 million yuan ($700,000), and has a The yield was 10.2%. Three of the quantitative trading giant's China funds reported returns of more than 16% over the same period, according to people close to Two Sigma.
In contrast, the benchmark CSI 300 index fell 11.7% in 2023. This comes as China's post-pandemic economic recovery struggles to gain momentum following an unprecedented real estate meltdown.
Many Chinese investment firms have tried to emulate Bridgewater's success by leveraging alternative asset classes such as commodities and derivatives, but with limited success. China's 771 locally owned multi-strategy hedge funds generated an average return of 2.8% last year, according to public records.
The outperformance of companies such as Bridgewater and Two Sigma in the Chinese market comes as global asset managers profit from the world's second-largest economy despite lukewarm growth prospects and geopolitical tensions between Beijing and Western capital. This highlights the possibility of obtaining.
“Global hedge funds have experienced many ups and downs, so they know how to survive bear markets,” said Zhang Zhongyu, vice president of Shenzhen Rongzhi Investment Consultants, which reviews local hedge funds. “Most Chinese funds only know how to make money in the bull market.”
Bridgewater held a roadshow with Chinese investors this month to win over the domestic market by diversifying into commodities and fixed income, and its resilient performance has led to a roadshow with Chinese investors, according to meeting minutes obtained by the Financial Times. It said it would offset losses in its stock portfolio.
Several gold ETFs listed in Shanghai and Shenzhen listed Bridgewater All-Weather Strategy China Private Investment Fund as one of their top 10 investors in the first half of last year, according to public records.
BCIM executives said at the roadshow that the fund's commodity investments, led by gold ETFs, which delivered double-digit returns last year despite the stock market downturn, were the biggest contributor to overall performance.
Meanwhile, most local asset managers, including industry heavyweights who were once critical of their Western peers, have been hit hard by the market meltdown. Li Bei's flagship fund, Banxia Macro Fund, has plunged 20.4% in the past 12 months. The Shanghai-based hedge fund manager made successful bets on commodities in the wake of the coronavirus pandemic, and was accused of dismissing foreign investors as “a swarm of flies with no purpose” in August last year after a sharp selloff. Are known.
Bridgewater China's strong performance has allowed the fund to expand its footprint in one of the world's largest asset management markets as other large U.S. asset managers such as Vanguard exit.
According to public records, BCIM issued a record 56 investment products last year, up from 30 products in 2022 and one product in 2018, when the company started operations in China.
An official at China Merchants Securities, which sells the All Weather Strategy Fund, said demand was “very strong” and only existing customers could make additional purchases.
“It's difficult to find investment products that have performed well in a bad market,” the person said.
Despite the rise of the hedge fund giants, traditional U.S. asset managers have struggled to understand the Chinese market. Index fund manager Vanguard closed its China office in November last year after its partnership with Jack Ma's Ant Group collapsed. BlackRock China posted losses on all eight of its equity-focused funds last year as the world's largest asset manager struggled to profit from a market driven by the whims of government policy.
Andrew Collier, an analyst at GlobalSource Partners, which advises U.S. investors on China investments, said, “Some funds that have a lot of capital and are very active are entering the Chinese market, and a small number of They may try to make a profit.” “It doesn't mean anything else [US] Funds with more established approaches could follow suit. ”