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> China disappoints hedge funds Winton and Oak Tree
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> Hedge fund companies Winton Capital and Oak Tree have failed to raise assets under a groundbreaking Chinese programme that gave six foreign hedge funds access to wealthy mainland investors.
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> The scheme, which launched in 2013 <http://www.ft.com/cms/s/0/6848d56e-1c23-11e3-b678-00144feab7de.html?siteedition=uk>, was considered an important first step for international fund groups to tap the vast levels of cash held by China’s 750,000 millionaires.
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> According to several asset management consultants, London-based Winton and Los Angeles-headquartered Oak Tree are the only hedge funds participating in the scheme that failed to raise $50m from Chinese investors.
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> Winton and Oak Tree declined to comment. The remaining four hedge funds that participated in the qualified domestic limited partner programme <http://www.ft.com/cms/s/0/568e3c32-e1cc-11e3-b7c4-00144feabdc0.html?siteedition=uk> (QDLP), also declined to comment (Man Group, Citadel, Och-Ziff and Canyon Partners).
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> A Shanghai-based consultant, who requested anonymity, said that Oak Tree never began fundraising in China as the push to join the QDLP scheme came from its US headquarters. The implication is the US arm of the business may have underestimated the cost involved in building a Chinese footprint.
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> Winton also struggled as the timing of joining the scheme was not ideal from a marketing perspective, according to Stephen Baron, deputy director of strategic solutions at Z-Ben Advisors, the China-based asset management research group. Winton’s flagship Futures fund finished 2012 down 3.6 per cent.
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> Mr Baron said: “Winton faced an uphill battle when it came to persuading investors to put their money offshore. When the scheme kicked off, most of [Winton’s] global funds did not have great performance.
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> “[The company] held back from pounding the pavements trying to get investments and waited for a rebound in performance when it would be easier to sell to [wealthy] investors.”
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> Before performance improved, Winton overhauled its international strategy so that China was no longer one of the focal points for its business. The strategic shift is understood to have led to the departure of Charles Allard, director of Winton’s Asia business for eight years, in 2014. Mr Allard did not respond to requests for comment.
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> All the hedge funds that participated in the scheme took longer than anticipated to raise assets. In a paper co-authored by Zen Ben analyst Chris Powers in March, he wrote: “Much to their surprise, QDLP license holders — even those that used banks — found the domestic market much less receptive [than expected] and had trouble filling the $50m quota each license holder was granted.”
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> Next week: An in-depth look at hedge funds in China
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Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
eschwerin@rosemontseneca.com <x-msg://59/eschwerin@obblaw.com>
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