DeepSeek founder’s fund slumps 16% as AI rout hits China quants
Liang Wenfeng’s Zhejiang High-Flyer Asset Management loses 15.7% in the week ended Jul 17
Add BT as a preferred source
CHINA’S quantitative hedge funds saw some of their steepest drawdowns last week as a local market rout deepened following the global sell-off in chip stocks.
A quant fund that aims to beat the CSI 1000 Index at DeepSeek founder Liang Wenfeng’s investment firm slumped 15.7 per cent in the week ended Friday (Jul 17), according to data seen by Bloomberg.
Liang’s Zhejiang High-Flyer Asset Management oversees more than 70 billion yuan (US$10 billion).
A similar fund at HanTak Investment Management lost an estimated 16.1 per cent, cutting its year-to-date excess return to 7.1 percentage points, while its strategy tracking the CSI 500 Index dropped 14.3 per cent, according to the data.
The Beijing-based firm manages more than 5 billion yuan.
The sharp drawdowns highlight the impact of the wild swings in artificial intelligence-related stocks, which surged earlier in 2026 before plunging recently as worries of a bubble intensified.
Chinese quants’ average excess return shrank more than 10 percentage points from a year earlier to only 3.5 per cent in the first half of 2026, as AI stocks’ sharp rally made it difficult for diversified portfolios to outperform the market, according to Shenzhen PaiPaiWang Investment & Management, which tracks hedge funds.
“This was an extreme market environment faced by the entire industry,” HanTak wrote in an investor letter seen by Bloomberg.
The CSI 1000 Index of small-cap Chinese stocks fell more than 12 per cent last week, the most since a sell-off that hit quants in February 2024.
The gauge was down more than 4 per cent on Monday afternoon, even as the benchmark CSI 300 Index gained.
Before last week’s tumble, High-Flyer’s CSI 1000 Quant Multi-Strategy No 1 had beaten the benchmark by an annualised 24 percentage points since inception almost eight years ago, according to PaiPaiWang.
HanTak declined to comment beyond its investor letter. High-Flyer did not immediately reply to a message seeking comment.
HanTak attributed last week’s drawdown to a sharp reversal in market trends since Jun 29, as the high-momentum growth stocks that had led gains in the first half of the year were suddenly sold off.
The slump in overseas technology shares quickly spread through the global tech supply chain, while falling margin-financing balances in China, concerns over liquidity being drained by large initial public offerings, and a broader deleveraging added to risk aversion.
The sell-off was amplified by an unusual convergence of factors that quants’ computer models use, HanTak said.
Factors that had previously offset one another – including momentum, liquidity and short-term reversal – moved lower at the same time, creating a rare headwind for quantitative strategies.
Market volatility was also about 50 per cent higher than in 2025, magnifying the impact on portfolios.
More than 10 Chinese hedge funds, including quants and discretionary managers, have announced plans in 2026 to subscribe to their own products with proprietary money to boost investor confidence, with the pace accelerating in July.
Ningbo Lingjun Investment Management Partnership pledged 200 million yuan on Sunday, while Ningbo Alpha2Fund Investment Management Partnership Enterprise committed half of that amount on the same day, according to separate company statements. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
