History of China's Private Funds-Twenty Years in Retrospect(Year 2014)
The Bull's Charge
The year was 2014. The Shanghai Composite Index, a barometer of China's stock market, was on a tear. It had surged from 2,112.13 points at the beginning of the year to a staggering 3,234.68 points by year's end. The air crackled with excitement, a palpable sense of optimism permeating every corner of the financial world.
This was the year the Chinese government unleashed the private funds industry, ushering in an era of unprecedented growth. A new era of "sunshine hedge funds" had arrived, with 7,188 new funds launched, raising a total of CNY 96.75 billion yuan($ 13.48 billion). The number of hedge funds in operation at the end of 2014 totaled 4,796, with total assets under management of CNY385.5 billion($ 53.71 billion), a total of 2,185 hedge fund managers and 108,557 industry professionals.
The industry was buzzing with activity. A wave of seasoned fund managers, disillusioned with the constraints of traditional institutions, were jumping ship to start their own ventures.The industry was awash with new names and new faces.
Xu Xiang, the enigmatic founder of ZeXi Investment, a firm known for its aggressive trading strategies, became the first to shift from passive to active management, taking direct control of his fund's investments.
Shanghai Chongyang Investment Management Co., Ltd, a firm known for its conservative approach, became the first to launch a fully registered and regulated hedge fund with Asset Management Association of China. China Eastern affiliated hedge fund company lauched the first CTA strategy hedge fund with AMAC.
Mr. Qiu Guolu, chairman of the investment committee of China Southern Asset Management Co., Ltd. , left the company and founded the hedge fund company Perseverance Asset Management 高毅资产, which brought together Deng Xiaofeng of Bosera Asset Management Co., Zhuo Liwei of CCB Principal Asset Management , and Sun Qingrui of 中银基金管理有限公司.
Hu Jianping, a China Asset Management Co., Ltd. fund manager, founded 拾贝投资 | Tenbagger Capital Management.
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The industry was a whirlwind of activity. Every day brought new announcements, new partnerships, new opportunities. The air was thick with ambition and the promise of riches.
The quantitative hedge fund side was just equally exciting. Cai Mei Jie, Vice President of CICC 's Sales and Trading Department, founded Lingjun Investment , LLP, a quantitative hedge fund. Ten years later, they sold $360 million of stocks within a minute, and their trading accounts were frozen by Shanghai Stock Exchange and Shenzhen Stock Exchange. Qiu Huiming returned to China from Wall Street and founded 明汯投资 Minghong Investment, he who bought a villa in Shanghai for CNY 285.5 million ($39 million) in an online auction in 2023. This event caused jealousy among retail investors.
Also, in the decade from 2004 to 2014, the overall capitalization of VC and private equity grew more than tenfold, making China the world's most important hub for VC and private equity outside of the United States.
But amidst the euphoria, a darker undercurrent was brewing. Brokers were offering aggressive margin loans, fueling a speculative frenzy. Unregulated "off-market" financing schemes were proliferating, injecting a torrent of hot money into the market.The seeds of a financial bubble were being sown, a fact that would only become apparent in the year after.
(To be continued...)
Reference：
Announcement of Regulations on Registration of Private Investment Fund Managers and Fund Filing Procedures: 【私募投资基金管理人登记和基金备案办法发布】-国家发展和改革委员会 (ndrc.gov.cn)
Xu Xiang's Profile: https://en.wikipedia.org/wiki/Xu_Xiang