Chinese Hedge Funds Grow Faster Than Their Returns

Mar 28 2011 | 1:18am ET

China-focused hedge funds posted returns little more than half those of their global peers last year, but still took in money almost twice as fast.

China hedge funds enjoyed net inflows of US$3.5 billion in 2010, a growth rate of 23%, reports. By contrast, the global hedge fund industry grew by 14% last year.

But Chinese hedge funds didn't live up to that promise, posting returns of just 6.11%. The global average, according to HFN, was 10.55%.

Despite the failure of a Middle East-inspired pro-democracy movement to gain traction in China, HFN said that the country still faces substantial hurdles.

"The uneventful 'Jasmine Revolution' showed the government will react swiftly to prevent similar scenarios in China," HFN wrote. "The balancing act of fostering growth along with the perception of equality while keeping inflation at bay when foreign governments are pushing for a stronger yuan is tenacious and underscores the importance of reduced reliance on long-bias equity exposure return generation."

Last year's gains give China-focused hedge funds a total of $18.68 billion in assets under management, well below their peak of $22.84 billion in the third quarter of 2007.

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