February 14, 2011 / 7:50 AM / 8 years ago

Guotai Junan says to launch China hedge fund

SHANGHAI, Feb 14 (Reuters) - The asset management arm of Guotai Junan Securities Co said on Monday it would launch a $45 million hedge fund, the first of such among brokerage firms and mutual fund managers in China.

Although many privately-run Chinese asset managers call themselves hedge funds, none of them have been approved by the securities regulator.

The hedge fund, to be managed by Guotai Junan Securities Asset Management Co, plans to raise 300 million yuan ($45 million) initially and will use index futures to mitigate systematic market risks, President Zhang Biao told Reuters in an interview.

The fund will adopt a so-called market neutral strategy, which aims to maintain a close balance between long and short positions.

“There’s huge demand for such products in China, with the market awash with cash seeking modest, but stable returns,” Zhang said, adding the product targets wealthy individuals with a subscription threshold of 2 million yuan.

The asset management firm aims to launch identical funds later to raise up to 5 billion yuan, he said.

While the hedge fund industry has been partly blamed for the global financial crisis, Zhang brushed aside concerns that the funds could play a destabilizing role in China’s stock market.

“The door is just open. Hedge funds in China are rabbits and sheep now, not wolves and tigers,” Zhang said. ($1=6.60 Yuan) (Reporting by Samuel Shen and Kazunori Takada)

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