China hedge funds lift Stock Connect after Ucits caution

Shanghai Hong Kong Stock ConnectHedge funds have explored territory where Ucits funds feared to tread. China-focused hedgies have enthusiastically participated in the Shanghai-Hong Kong Stock Connect programme, a stock market trading link, figures suggest.

Hedge funds investing in China surged to a record monthly gain in April, lifted by the programme and by lower Chinese Central Bank rates, according to HFR, a hedge fund index provider.

The HFRI China Index of hedge fund returns increased 13%, its strongest monthly gain since the index was launched in 2008, and through the first four months of 2015, the index climbed 18.8%.

Initially, the November 2014 launch of Stock Connect was held back by Ucits funds showing caution about regulatory issues.

The latest hedge fund figures also show that global capital invested in the Asian hedge fund industry surpassed a milestone of $120 billion (€105 billion), according to the latest HFR Asian Hedge Fund Industry Report.

Inflows into Asian hedge funds in the first quarter totaled $1.1 billion, the tenth consecutive quarter of inflows, with capital moving into emerging and pan-Asian funds partially offset by outflows from Japanese-focused funds.

Asian hedge fund inflows were concentrated in equity-hedge strategies.

Kenneth J. Heinz, president of HFR, says: “Recent developments with Chinese equity markets, including performance and trading volume, are both exciting and historic in magnitude, with significant involvement and participation from Asian-focused hedge funds attracting capital and interest from global investors.”

He adds that it is likely that the Asian hedge fund industry is at the beginning of a capital growth cycle.

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