US hedge fund the first to open in China

Added 17th May 2016

Bridgewater Associates, led by Ray Dalio, became the first foreign hedge fund to set up a wholly-owned subsidiary in the Shanghai Free Trade Zone.

US hedge fund the first to open in China

The US hedge fund, with $150bn of assets under management, set up a local office on March 7 with a registered capital of RMB 50m ($7.67m), according to the official filing shown in a report by Z-ben Advisors on Monday. The scope of operations include investment management and investment advisory.

Ray Dalio, founder of Bridgewater Associates, is cited in the document as the legal representative.

Bridgewater is the third investment management wholly-owned foreign entity (WOFE) in China after Aberdeen Asset Management and Fidelity Investments.

First reported by the WSJ on Monday, it quoted the Z-ben report saying that Bridgewater may take advantage of trading on the Chinese bond market, as well as providing services to Chinese institutional clients.

“This positions Bridgewater to move at speed once global demand for RMB does finally materialise," Z-ben noted.

The WOFE differs from qualified domestic limited partner licenses as the latter only allows firms to sell offshore products to mainland investors.

The approval of Bridgewater “stands in stark contrast to the belligerently loud claims among Ray Dalio’s hedge fund contemporaries, all of whom are now crowded like sardines into the same China short trade", the Z-ben report said.

Other hedge fund managers, such as Jim Chanos and Kyle Bass, have voiced to short A-shares and the Chinese currency amid bearish outlook on its ecnonmy.

When A-shares collapsed in the second half of last year, with Shanghai Composite Index diving as much as 45%, the authorities blamed “malicious short selling” in the market.

“What this will most likely mean is continued frustration among global managers when it comes to understanding what is actually possible,” according to the WSJ article.

Mainland media noted Bridgewater is holding a 5.5% stake in the iShares MSCI Emerging Markets ETF, which could benefit from the possible inclusion of A-shares to the index.

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