Market Assessment

Market Assessment – Global hedge fund targets local investors

A U.S. hedge fund used quantitative strategies to target the local market

Following the performance of China’s equity markets in 2014 and extreme volatility over the subsequent two quarters, a U.S. hedge fund sought to take advantage of increased interest from local investors in accessing hedge funds. Z-Ben was engaged to develop a framework that would allow the client to both access local investors and, also in the long term, use existing strategies for Chinese equities. Due to difficulties in making purchases of alternatives through existing cross-border programs, Z-Ben worked closely with the client to develop a strategy to allow them to access the local market.

Opportunity

Against the backdrop of regulatory easing and the on-going development of new cross-border programmes, the opportunity set for global hedge funds in China is expanding rapidly. Our client, a hedge fund, identified the potential of the Chinese market as key to their growth and approached Z-Ben Advisors to develop a comprehensive market assessment and then a long-term entry strategy for the firm.

Solution

Z-Ben helped develop both a strategy and mainland structure that would not only help the client to access local investors but also, in the longer term, directly seek to take advantage of opportunities in the local market by developing local investment capabilities.

Result

The client represents one of the first batch of truly international hedge funds to begin operations on the Mainland, without relying upon a JV. This mainland presence will significantly improve the quality of analysis that the firm is able to undertake when developing investment strategies suited to local markets. Moreover, the client has also been able to make significant inroads in developing a client base amongst investors interested in increasing their offshore exposure.

Market Assessment – U.S. asset manager targets China for investment and fundraising

An American mutual fund manager sought to increase geographic coverage and raise funds from Chinese investors

A U.S. public funds manager sought to expand its regional strategy and carve out the Chinese Mainland as a dedicated investment geography, separate from its emerging market funds. Simultaneously, it planned to target Chinese retail and institutional clients with existing or potentially new fund products that would offer U.S., European and EM exposure. In developing the build-out of these capabilities, the manager engaged Z-Ben Advisors to act as a key project coordinator during the creation of numerous domestic partnerships and the establishment of a domestic subsidiary.

Opportunity

The Mainland is seeing unprecedented growth in the amount of investable wealth held by Chinese investors. However, the infrastructure required to service and support these investors has not kept pace. As a leader in the U.S. market, the client planned to import its expertise in offering comprehensive financial services to local customers. Additionally, the firm also sought to carve out Greater China and mainland A-shares in particular from existing EM funds being sold to American clients.

Solution

Z-Ben Advisors was retained to work closely with the client to develop a comprehensive market assessment and entry strategy, inclusive of all of the client’s long-term goals. Resource optimization was critical to this process. A strategy was developed allowing for both the maximum degree of optionality with partnership arrangements, whilst developing and staffing an onshore structure that fostered onshore product development.

Result

Implementation of the strategy has enabled the client to develop one of the most comprehensive frameworks of any global firm in the Mainland to date. The client has created  a wide variety of products in-house, whist also supporting the distribution of existing funds and finalizing the transfer of assets from emerging market allocations to dedicated China products.

Other areas of consulting expertise: