“China’s Carl Icahn” Returned 250% YTD, Or Maybe Not

“China’s Carl Icahn” Returned 250% YTD, Or Maybe Not
China's Carl Icahn

Zexi Investment’s Xu Xiang is the most famous money manager in China, and is variously known as known in the country as “hedge fund brother No. 1” and “China’s Carl Icahn.”

Xu has become the latest target of the Chinese government’s crackdown on stock fraud and corruption. The official Xinhua News Agency reported over the weekend that Xu had been detained by the police, and that an investigation had been launched into operations at Zexi.

Of note, Shanghai police raided Zexi’s office on Sunday and removed several computers and multiple documents, according to a property management official.

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Chinese authorities widening stock fraud crackdown; investigating China’s Carl Icahn

The Chinese authorities have recently been increasing the pace of their investigations into activities they suspect may have worsened the massive stock sell off this summer. On a related note, two senior managers at Yishidun International Trading and a director at Huaxin Futures were arrested last week after a probe indicated they made 2 billion yuan ($316 million) in “illegal profit,” according to the Chinese Ministry of Public Security.

These two execs join a growing list of those swept up in the ongoing stock fraud crackdown in China. Others arrested include managers from the country’s largest brokerage, an official who formerly led the Shanghai and Shenzhen stock exchanges, and a journalist from business magazine Caijing. In addition, Agricultural Bank of China Ltd. President Zhang Yun was being held in order to assist authorities with an ongoing investigation.

The office of Zexi Investments in Shanghai was closed Monday morning. Calls made by the media to the Zexi office were not answered, and Xu did not respond to clls to his personal phone number. Apparently there have been no official statement from Xu or Zexi to date.

Of note, Zexi Investments ran four of China’s top 10 hedge funds during the highly volatile June and August quarter, based on data from the Shenzhen Rongzhi Investment Consultant Co. Amazingly, the average return on Zexi’s five stock funds has been in top three funds every year since the firm was founded five years ago, according to the Economic Daily. Even more incredible, five funds managed by Xu yielded an “astonishing” 249 percent on average this year through September, according to Shenzhen Rongzhi. That’s even as the Shanghai Composite index has advanced only 2.8 percent in 2015, after a 36 percent plunge since June 12 has wiped out most of this year’s gains, according to Bloomberg.  And as we noted yesterday, some of the returns reported by the fund may have even been higher – see chart below.

China's Carl Icahn
China’s Carl Icahn

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