Three years after China opened its 2.5 trillion yuan ($355 billion) hedge fund market to global asset managers, the industry is discovering just how hard it is to win over the country's investors.
BlackRock Inc., Man Group and 20 other foreign firms licensed to run Chinese hedge funds — or private securities funds, as they're known locally — amassed about 5.8 billion yuan of assets as a group as of August, according to data compiled by Shenzhen PaiPaiWang Investment & Management Co. The meager haul — amounting to 0.2% of hedge fund assets in China — reflects a host of challenges.
International names like BlackRock don't resonate much in China's crowded market of close to 9,000 hedge funds, which has its own set of local stars. The world's largest money manager is routinely confused with private equity giant Blackstone Group Inc. UBS Group's shared Swiss roots with Credit Suisse Group mean their Chinese abbreviations are just one similar-meaning character apart, also prompting mix-ups.
The limited name recognition is compounded by distribution hurdles. It all suggests a long wait before China turns into a meaningful source of profit for international money managers, which are desperate for new avenues of growth as clients in developed markets shift toward low-fee investments.