Quant hedge fund Aspect Capital shrugs off China risk with new strategy

Beijing

QUANT hedge fund firm Aspect Capital is raising money for a strategy that offers foreign clients access to Chinese markets at a time many of its peers are backing away from the country.

The US$9.3 billion London-based money manager started trading for an algorithm-driven fund this week, betting on China's markets for obscure and unique tradable assets such as eggs, liquid glass and hot-rolled coil.

The fund launched with US$100 million in seed capital and is in talks with clients to raise more money, chief executive officer Anthony Todd said in an interview. It can manage as much as US$1.5 billion.

The move comes in the wake of Beijing's sweeping anti-monopoly probes against Big Tech, cybersecurity reviews for foreign listings and a decision to ban profits in after-school tutoring companies, which sent shock waves through global financial markets.

Representatives of Man Group, Soros Fund Management and Elliott Management raised concerns about the outlook for Chinese stocks traded in New York and Asia last week.

"We completely acknowledge and completely understand that the Chinese authorities are very concerned about excess speculation," Todd said. "But authorities are very keen to open up the markets and want to ensure that they do that in a very conservative and methodical fashion."

The fund trades stocks and bonds futures among 40 markets that mostly include agricultural, energy, metals and industrial sectors.

It joins a growing number of quant strategies trying to profit from niche or "exotic" markets still offering excess returns over benchmarks.

Such funds are in the middle of a record year of gains by betting on markets such as Dutch and British natural gas or Spanish and German power as a demand-supply mismatch has triggered surging energy costs.

Aspect already runs a global fund that bets on exotic markets. That fund was up 24.4 per cent this year through September, according to its website. BLOOMBERG