The Chinese boss of the hedge fund giant Man Group re-emerged from a mysterious week-long absence yesterday to dispel rumours she had been taken into custody by authorities probing the country’s recent market turmoil.
Li Yifei, the chairwoman of Man Group China and one of China’s most high-profile businesswomen, posted on her social media account that she had attended “industry meetings” and then gone on holiday to meditate, rejecting reports she had been detained.
The upbeat message from Ms Li, who is not accused of any wrongdoing and has not been charged, follows a report on 31 August that she was helping police with an investigation into big swings in the Chinese stock markets.
Subsequent comments from her husband, Wang Chaoyong, who told reporters in China she was locked in meetings with regulators in Beijing, added to the confusion.
“I attended an industry meeting and had a good break during the military parade. The weather in Beijing was quite good,” Ms Li said on Weibo, China’s answer to Twitter.
Ms Li’s case highlights the embryonic role that hedge funds play in China’s emerging investment landscape, and the tight rein the authorities in the economic superpower keep on entrants hoping to gain a stronger foothold in the market.
Man, listed on the FTSE 250, is one of only six overseas hedge funds permitted to raise money from wealthy Chinese investors, alongside Och-Ziff Capital Management, Citadel, Canyon Partners, Winton Capital and Oaktree Capital.
The Qualified Domestic Limited Partnership (QDLP) regime was launched by the Beijing authorities in 2013, allowing alternative investment firms to raise just $50m of cash each from investors within China.
Despite two of the six (Winton and Oaktree) failing to raise any funds, a second batch of fund managers is due to start seeking cash later this year after winning another round of licenses handed out in March. UBS Global Asset Management, Deutsche Asset & Wealth Management, Nomura Asset Management, EJF Capital and CBRE Global Investors will all be able to raise money, with an increased limit of $100m.
Yet the shockwaves from China’s market collapse and fears of a crackdown by authorities have sparked questions about how far hedge funds will want to plough resources into an increasingly opaque market.
“It sets a dangerous precedent,” said the hedge fund boss Crispin Odey, a well-known bear on the Chinese economy. “[Ms Li] is not allowed to say it’s intimidating and she has to say nice things, but this kind of thing stops people from selling. It stops it being a market and closes the whole thing down in the end.”
Ms Li’s brush with the authorities seems to have alarmed many investors in the West, but people familiar with the matter suggested the probe might simply reflect China’s nervous approach to an industry which has often been viewed in a dim light by Western regulators.
China’s response to the stock market crash late last month, dubbed Black Monday after shares plunged 8.5 per cent in a single session, ensnared a host of overseas investors in the country, so perhaps it is not surprising that Ms Li – a former executive of the music channel MTV Networks – was called in by authorities to help them understand the crisis.
Despite the headwinds, hedge fund consultants said the pressure on the investment community would be short-lived and would not stem the inflow of funds.
“It is reasonable to expect continued interest from the established funds with a long-term outlook,” said Daniel Harris, the head of the hedge fund practice at the law firm Macfarlanes. “Stability of capital is as important as attracting it, so quota usage will always be approached carefully by such funds.”
Man Group declined to comment and Ms Li could not be reached for comment.