Hedge Funds Add New Warning to China Investment Products

Fund managers are adding new warnings to China investment products in a bid to reduce their legal liability if regulators repeat the heavy-handed intervention in financial markets that rattled investors globally.

Hedge funds, asset managers and exchange traded fund (ETF) providers are scrambling to add the new disclosures to legal fund documents following watershed government actions in recent months that are now forcing managers to rethink China investment risk.

The legal measures illustrate the degree to which China’s market intervention is set to have a tangible long-term impact on investor confidence. Rather than shrugging off the actions of the government, fund managers see the intervention as a material risk going forward, lawyers and fund managers said.

“The government’s actions have shown their lack of confidence in the market mechanism and its ability to achieve stable levels reasonably swiftly,” said Sanjiv Shah, chief investment officer at London-based Sun Global Investments, which manages money for high net worth clients.

“This further damages the confidence of existing and prospective investors.”

The disclosures on trading halts, liquidity freezes, short-selling bans, and other regulatory restrictions, could see retail investors, pension funds, and insurers pull more money out of these products in coming months.

Via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza