Yuhuang Shannan — an hour's high-speed train journey from Shanghai — is a newly formed, walled village in which only hedge fund employees and their visitors are allowed to venture, a kind of Canary Wharf with Chinese characteristics, with schools staffed by non-Chinese teachers, a private club, and its own health care facilities.
Hedge funds in China — like hedge funds everywhere — are losing money on average, but they're losing it at a slower rate than local equity and credit markets, so they have not faced the investor exodus that has threatened the hedge fund industry out of China. Many western hedge funds are relocating to China, claiming that the country's inefficient markets offer opportunities to "achieve alpha" and beat the market (if the Chinese government doesn't intervene, as it did in summer 2015 to prevent short-selling and to kill equity index futures).
Bruce McGuire, who runs the Connecticut Hedge Fund Association, says he’s hosted four Chinese delegations in Greenwich over the past 12 months. The former Goldman Sachs Asset Management executive has also toured fund towns in Hangzhou and Beijing, and he predicts it won’t be long before the country develops its own global hedge fund powerhouses. When those firms eventually look for a base in the U.S., McGuire wants to make sure Greenwich is at the top of their list. “We’d like to get more than our fair share,” he says. “We want to attract the Bridgewater of China.”
Until then, Yuhuang Shannan Fund Town will serve as China’s launchpad. “When you’re still a small firm, even if you venture into Beijing or Shanghai, it’s hard to reach out to the right funding partners,” says Wang of MD Grand Investments. “It’s easier to talk with banks and brokerages as a member of a fund town. If you’re not in a center of funds, you’ll be ignored—the last thing you want as a startup.”
Welcome to Greenwich, China [Gary Gao, Emma Dong, Dingmin Zhang, and Sam Mamudi/Bloomberg]
(via Marginal Revolution)
(Image: Qilai Shen/Bloomberg)
