For Li Yifei, Man Group’s Chinese chair, the announcement that the world’s largest publicly traded hedge fund can now conduct business in China might seem like a complete turnaround. It was a little over two years ago when she was taken into custody by Chinese authorities over market manipulation charges. But as Man Group beats the likes of Winton Capital Management, another London-based hedge fund rival that has dabbled with the idea of cracking the Chinese market, it looks to crack markets that have largely been devoid of foreign algorithmic competition.
Man Group: One of the original systematic trend followers is first to crack Chinese market
Man Group will bring its signature systemic trend following methodology to the Chinese market through a wholly-owned subsidiary in Shanghai, they said in a press release Monday. The firm is registered with the Asset Management Association of China as a private securities investment fund manager.
The move follows a January decision to allow Fidelity International to become the first global asset management company allowed to solicit investments in the nation.
“As China’s fund management industry continues to go from strength to strength, we are pleased to launch our first onshore investment strategy for qualified local investors,” Li said. “The strategy leverages Man AHL’s 30 years of quantitative investing expertise, combining this with our local investment capabilities to serve the needs of Chinese investors.”
The hedge fund will be directly using trading algorithms to buy and sell in Chinese futures contracts on bonds, stock indices and various commodities, the firm which manages $103.5 billion globally said in a press release.
"We strongly believe that there has been a growing appetite from the Chinese institutional investment community for the products we will offer under the new license, and we look forward to continuing to develop our business in the region," Luke Ellis, CEO of the Man Group, was quoted as saying.
Man Group wins battle to enter China
Man Group was one of the early trend following hedge funds and is credited with being among a small group to pioneer the systematic trading industry.
The fund was originally Man AHL, but eventually the three principles in the firm that formed the AHL – including Winton Capital founder David Harding – left the firm and formed their own systematic trend following offerings.
China has been an enigma for quantitative and derivatives focused firms. Exchanges such as the CMEGroup have long courted the region without substantial trading volume to show for their efforts.
In 2015, Winton Capital and Oak Tree Capital were among six funds to be granted access to the Chinese market to raise investments from the nation’s more than 750,000 millionaires. The other funds included Man Group, Citadel, Och-Ziff and Canyon Partners but none of the participants were allowed to trade in that market.
“Winton faced an uphill battle when it came to persuading investors to put their money offshore. When the scheme kicked off, most of [Winton’s] global funds did not have great performance,” consultant Stephen Baron explained at the time. “[The company] held back from pounding the pavements trying to get investments and waited for a rebound in performance when it would be easier to sell to [wealthy] investors.”
The move allowing Man Group access to trade its markets comes as Chinese regulators are in the midst of a hedge fund crackdown. The China Securities Regulatory Commission (CSRC) is probing market manipulation charges against 10 private funds in the Asian nation.
Currently, 8,294 hedge fund companies manage nearly 2.3 trillion yuan ($348 billion) as of Nov. 30 in private securities investment funds, according to data from the Asset Management Association of China. Assets under management slipped in 2017 after being on a strong assent since 2004.