Record Global Fund Launches in China Amidst Weak Yuan and Economic Uncertainty

109

China has witnessed a surge in the launch of global funds to a record level, driven by a depreciating yuan and a delicate economic landscape, reflecting a lack of confidence among domestic investors.

Data from Z-Ben Advisors reveals that eleven funds have been introduced under the Qualified Domestic Limited Partner (QDLP) program this year, surpassing the total for any previous year. Notable managers like Blackstone, Bridgewater Associates, and Oaktree Capital Management have initiated funds, although the total funds raised have not been disclosed.

These funds, targeting high net worth and institutional investors and investing in overseas assets, are gaining traction amidst sluggish Chinese markets. The yuan’s decline against the dollar, signs of fatigue in the stock market following a rebound from five-year lows in February, and record-low yields on 10-year government bonds are contributing factors.

“Investor demand for offshore products has risen rapidly this year due to a weak yuan and sentiment,” noted Ivan Shi, head of research at Z-Ben Advisors, highlighting the popularity of alternative investments and foreign bonds.

In April, Blackstone launched its inaugural QDLP fund, directing capital to its Private Equity Strategies fund. Sources familiar with the matter disclosed that the initial sales target of $40 million was achieved in less than two weeks.

Bridgewater, a hedge fund giant, also established an outbound fund this year, as per official data. Other new entrants include U.S. asset manager Principal Financial Group, which introduced a data center fund, and firms like Oaktree, abrdn, and UBP, which issued global bond funds.

Although QDLP funds were introduced in 2012 to complement other outbound investment channels in China, the amounts involved remain modest relative to the country’s capital markets. Outflow is controlled due to caps on fund size, and operations are confined within a closed loop, akin to the Stock Connect scheme, with sellers’ cash repatriated to China.

Market observers suggest that Chinese authorities are largely supportive of this sector, indicating that more products are in the pipeline. U.S. managers VanEck and Rayliant Global Advisors are currently in the process of applying for QDLP licenses.

Jason Hsu, chief investment officer at Rayliant, noted that obtaining QDLP approval as a foreign manager appears to be more straightforward than before.