Roslyn Zhang, a managing director at China Investment Corp.(CIC), has slammed hedge fund managers on a number of different issues in what seems to us like some high profile trolling.
CIC managing director rails against fund managers
“Over the last couple years I’m kind of disappointed by the performance,” Zhang said Wednesday at the SkyBridge Alternatives Conference in Las Vegas. Zhang is responsible for CIC’s fixed-income and absolute-return investments, and claimed that the SWF is a “sizable” investor in the hedge fund industry.
Zhang said that while Chinese retail investors have been criticized for driving up prices by crowding into markets, hedge fund managers should be called out for similar behavior. She said that “herd mentality” affects fund managers, and emphasized the widespread betting against the Chinese yuan.
“All kinds of strategies, they run different strategies, they all have the same trade,” said the CIC managing director. “They really don’t know much about China but they just spend two seconds and put on the trade. Should we pay 2 and 20 for treatment like this?” she said, referring to the industry’s fees. On the other hand, Chinese hedge funds have not had great returns recently either, although in their defense if they are good their CEOs probably disappeared somewhere.
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The fees charged by hedge fund managers are usually 2% of assets as a management fee and 20% of profits. They are among the best paid finance professionals in the world, but their fees have been criticized by investors such as Warren Buffett.
Debate over China rumbles on
Hedge fund managers have been betting on a hard landing for the Chinese economy, but Zhang says it continues to be strong. The CIC managing director believes that the economy could absorb more construction.
“If you’re worried about China, you should be twice as worried about here,” she said, referring to the United States. The International Monetary Fund projects a 6 percent expansion on average over the next five years, which is below what Chinese leaders are aiming for.
Zhang sparked a heated debate between Don Brownstein, founder of Structured Portfolio Management, and Milton Berg, founder of MB Advisors.
“I would rather put my money with a communist government than a capitalist government,” Brownstein said, without providing any further details.
Berg said that the Chinese stock market provided more than enough evidence for the weakness of its economy. Stocks have dropped around 20% so far this year, while the S&P 500 has risen around 2%.
Zhang recommended that money managers learn some new skills. “Only less than 10 percent of managers are actually capable of adapting to the new reality,” she said, without providing details. “Probably 90 percent of the managers think they are part of the 10 percent anyway.”
According to the WSJ, Zhang is not just trolling.
The CIC official later told The Wall Street Journal in an interview that she was booting managers from her approved list and beginning the process of evaluating whether to slash the fund’s investment in hedge funds overall.