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Alternative Market Briefing

Clifford Chance says it’s time for international hedge fund firms to build a presence in China

Wednesday, October 24, 2012

Beverly Chandler, Opalesque London: Clifford Chance has published an overview of the law and regulations regarding hedge funds in China. The firm writes that there is no comprehensive legal or universally accepted definition of 'hedge funds’ in China. "In China, strictly speaking, hedge funds as usually described are not recognised by law".

However, various regulated hedge fund-like financial products have been thriving in the Chinese market for 10 years and, the firm writes, growth has been tremendous. "Generally, they share certain common characteristics, including: being privately offered; requiring investors to have a certain minimum net worth and/or level of financial sophistication; investing in equity securities, fixed income securities, derivatives, futures and other financial instruments; having a perpetual term."

However, these funds are regulated by different regulators and subject to different regulations. "This fragmented regulatory regime has hampered the creation of a uniform private offering regime and the development of privately offered funds. Additionally, it has allowed regulatory arbitrage by market participants."

Clifford Chance believes that regulatory changes currently under discussion by the Chinese legislature may provide some legitimacy for hedge funds and lay the basis for a regulatory framework. If so, the firm believes, hedge funds in China sho......................

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