According to a study by Singapore Management University, hedge funds linked with Greater China are producing more alpha than widely believed.
In China, the short-selling of securities is illegal and foreign investments in A-shares are restricted. It is therefore widely believed that Greater China hedge funds are predominantly long-only, and tend to resemble index funds, producing returns simply by riding the equity market bull run in the region.
The study, commissioned by Fullerton Fund Management, looked at the returns of Greater China funds from 2000 to the end of 2006, and showed that many funds had, in fact, been producing alpha, presumably because many of them have been able to short foreign-listed Chinese stocks in Hong Kong or Taiwan, for example.
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