E Fund Management, the second-largest asset management company in China, is planning to offer the nation’s first registered hedge fund. Along with a long-only mutual fund, the two will invest in emerging markets securities. They will be run out of E Fund’s Hong Kong office.
Within six months, E Fund aims to raise $200 million to $500 million for the two funds combined. Within five years, the target assets under management is $5 billion. E Fund Management has $29 billion in assets under management.
The long-only fund aims to beat the S&P/IFC Emerging Markets Regional Investible Composite Index by 4% to 6% a year, and the hedge fund seeks to deliver 15% a year, net of fees.
The move follows eased rules for separately managed accounts by the China Securities Regulatory Commission in July and the introduction of index futures and short selling in April.
“Separately managed accounts at asset management companies now are in the position to operate in the way hedge funds in developed markets do with the same strategies at their disposal,” Liu Zhen, a managing director in the index and quantitative investment department of E Fund, told Bloomberg News.
“This is opening up a new market seeking absolute returns, which could be quite attractive in a market that has been volatile,” said Dong Yiting, a senior analyst at Guosen Securities.
“People used to say emerging markets were risky, developed markets are safe,” said Charles Wang, chief executive officer of the Hong Kong office of E Fund Management. “Now they realize it’s not necessarily the case. Developed markets have a lot of challenges. Emerging markets have a lot of opportunities, including fundamentals.”