UK fund manager Man Group Plc sees ample opportunities to generate strong returns from investments in China and plans to expand its presence in the world’s second-largest economy after the country eases its strict COVID-19 curbs, its CEO said.
Those returns would come from “great trading opportunities“, including placing long and short bets on Chinese equities, said Man Group CEO Luke Ellis, without giving any details.
The comments come as most foreign funds have sought to exit China in recent months mainly on concerns that President Xi Jinping will prolong the country’s strict COVID-19 policies and private sector crackdowns during his third term.
“I think the alpha opportunities in China are very attractive,” Ellis told Reuters on Thursday, referring to the potential to generate returns that are higher than market benchmark gains.
“We’ve been able to generate good alpha in the Chinese market. I feel comfortable that we can do it in the future.”
Net selling in Chinese equities from international active funds totalled around $30 billion over the past year and global hedge fund allocations in Chinese equities have declined from 15% at the peak in 2020 to 8% now, Goldman Sachs estimates.
Tiger Global Management has paused investing in Chinese equities, as it reassesses its exposure to the country after Xi cemented his grip on power, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Ellis’ comments also come as Chinese stocks soared on Friday with the Hong Kong stock index within reach of its best week in a decade on reports of early progress in U.S. checks on Chinese company audits and hopes for COVID restrictions to be relaxed.
With China gradually opening up its markets to foreign investors, Ellis sees the potential for Man Group to expand its operations in that country when it relaxes its stringent COVID-induced border controls. But he did not elaborate further.
“With (Chinese) institutional clients, there’s lots of opportunity,” said Ellis, who took the helm at the hedge fund a decade ago, during which period its assets under management (AUM) rose about 2.5 times to $138.4 billion by end-September.
Global funds such as Winton and Two Sigma have in recent years set up China operations to grow local revenue, with hedge fund giant Bridgewater saying in August China is of special strategic significance for the firm.
Man Group launched a Chinese domestic private fund unit in 2017 that currently runs one fund with a macro strategy.
The fund makes bets on commodities, equities and bonds, which it can market to Chinese high net worth individuals or institutions. It has amassed more than 1 billion yuan ($136.87 million) since 2017, according to official fund regulator data as by June.
Reuters