China’s Sovereign Wealth Fund Aims to Invest in Hedge Funds

Date: Thursday, June 18, 2009
Author: Tom Cahill, Bloomberg

Felix Chee, an adviser to China’s $200 billion sovereign wealth fund, said it aims to make investments in hedge funds.

“We will have a preference for managed accounts,” he said in an interview today at the GAIM International hedge fund conference at Monaco’s Grimaldi Forum. “The platform would like a core of single-manager funds and fund-of-funds.”

Chee, who said he will initially run China Investment Corp.’s hedge fund and proprietary trading effort, is a special adviser to the chief investment officer of CIC.

“It’ll be across the spectrum of strategies,” he said. “We’re looking for the best managers and a handful of fund of funds, and when I say handful I mean five or less.”

Chee previously managed the University of Toronto’s endowment, where he managed a portfolio of about $1 billion in hedge fund assets. Asked if he was daunted by the prospect of running a $200 billion portfolio, he said “I try not to look at the zeros.”

About 850 hedge fund managers, investors and service providers gathered at the conference, down from 950 last year, amid signs the $1.3 trillion industry has started to recover after its biggest losses in nearly two decades in 2008. Hedge funds rose 9.4 percent through May, according to Chicago-based Hedge Fund Research Inc.’s HFRI Fund Weighted Composite Index, after a drop of 19 percent last year.

Hedge funds are private pools of capital whose managers can buy or sell any assets, bet on falling and rising asset prices, and participate in profits from money invested.

HFR estimates there were about 6,644 hedge funds operating at the end of March, down from 7,634 at the industry’s peak at the end of 2007, when hedge funds managed $1.9 trillion. HFR estimates 1,471 hedge funds closed in 2008, partly offset by 659 funds starting.

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net