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New Fund to Try the 'Chinese Tango'

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BEIJING (–Hong Kong-based Noble Apex Advisors and China’s Guangfa (GF) Securities are teaming up to launch the AAM China Fund, a long/short equities vehicle.

The Caymans-domiciled fund currently is raising capital and will begin trading in November. The management fee will be 2% annually, with a performance fee of 20% along with early redemption fees. The administrator will be Bank of Bermuda/HSBC.

The three directors of the fund are associated with Tsinghua University, two as PhD. candidates and one as a professor. In making investment decisions, the trio must contend with the often bewildering terrain of the Chinese markets, which are subject to policy swings by the central government while also being tugged by the sometimes conflicting objectives of the local governments. The professor among the directors, Chen Xiao, describes the challenge of navigating this scene as the “Chinese tango.”

In China, Mr. Chen said in a recent presentation in Hong Kong held by fund manager Apex Asset Management, the central government serves as both regulator and developer of the capital markets, so that its actions significantly affect the direction of the markets. Local governments often act in the interest of local companies, in some cases providing subsidies to them and pushing their growth at the expense of compliance with central government accounting standards and regulations.

Another director, Xia Heping, general manager of GF Securities, said he believes that the Chinese stock market still is largely underdeveloped and relatively small, with market capitalization as a ratio to gross domestic product and personal savings being low compared with most developed countries. He said that as the government moves to speed the growth of the stock market, new investment opportunities will arise. He also pointed to nine items that China’s National Council proposed earlier in the year that he said aim at strengthening market operations and bolstering investors’ confidence.

Chan Mou-Fung, of Noble Apex and the third AAM China Fund director, said he likes companies in strategic industries that are favored by government policies, such as energy and mining sectors.

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Contact Bob Keane with questions or comments at: [email protected]