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Komfie Manalo, Opalesque Asia:

The arrest and detainment of Shanghai’s Zexi Investment boss Xu Xiang is putting pressure on China’s private funds, fearing this could be a prelude to a more regulatory tightening on the industry.

Xu, also known in China as "hedge fund brother No. 1" has generated both awe and skepticism within the industry because of his ability to generate profits even during volatile times, reported Bloomberg.

Xu was arrested by the police on Sunday, becoming the latest target of a widening government crackdown on insider trading which regulators are blaming for the market selloff that wiped out nearly $5 trillion from the stock market. The police raided Xu’s office in Shanghai and confiscated computers and other documents.

Prior to his arrest, Xu was managing four of the top 10 performing hedge funds in China between June and August. Zexi’s five stocks average returns ranked in China’s top three every year since the firm was founded in 2000.

However, while some of his peers admire Xu for his knack in placing perfectly timed bets, others were also skeptical about his ability.

According to hedge fund tracker Eurekahedge, Greater China hedge funds lost the most since 2000 between June and August. They were up 1.13% in September and up 3.9% YTD (and down 14% in the last three months).

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