London-based quantitative hedge fund Aspect Capital will soon apply to qualify to set up shop in mainland China to establish onshore fundraising and offer its products, two sources familiar with the matter said.
The hedge fund, overseeing more than $8 billion in asset, is preparing to open a Shanghai office and hired two senior staff in October, according to a third source and LinkedIn profile updates.
The move by the computer-driven fund giant comes at a time when many foreign investors are retreating from the world’s second-largest economy due to increasing economic and geopolitical challenges and shows some global investors still see potential in China’s market.
Aspect aims to be registered as a wholly foreign-owned enterprise (WFOE), which would allow the hedge fund to tap into the increasing demand from China’s massive investors for alternative assets. They are still in the early stage of the process, said one of the sources.
Aspect Capital declined to comment on its China business plan.
China has been making efforts to lure foreign investment into its capital market, by improving efficiency, and expanding the range of assets and cross-border hedging tools, despite its tensions with the west.
Citadel Securities, one of the world’s biggest market-making firms, last month said the firm is exploring a China licence.
Currently there are approximately 115 foreign financial institutions that have set up WFOEs in China, including Blackrock, Blackstone, and KKR, according to Z-Ben Advisors.
In 2021, Aspect launched a China-focused strategy offering foreign clients access to a diverse range of the country’s commodity futures and government bond futures via swaps.
“Chinese futures market is incredibly deep, liquid and different,” Razvan Remsing, director of investment solutions at Aspect Capital, told Reuters last week.
He said futures on industrial commodities such as PTA, Polyethylene, PVC or fertilizer in the form of soda ash and urea or inputs into construction like glass, have no western equivalent markets. Thus the global pricing on these commodities is set in China.
So far this year, trend-following quant funds that typically are machine-driven and trade across equities, bonds, and commodities, have done well in China even as its equities market slumped to a five-year low.
Aspect’s competitor, U.S. quant fund Two Sigma Investments, saw its CTA (commodity trading advisers) fund in mainland China jump 10 percent for the first 10 months, according to an investor letter seen by Reuters. Two Sigma declined to comment.
