Key Takeaways
- • UBS Asset Management became the first foreign asset manager to launch an onshore fund of private securities funds (FOF) in China, announced July 15, 2019 via its wholly foreign-owned enterprise (WFOE) in Shanghai.
- • The "UBS (CN) A&Q China Diversified Fund of Funds" employs a dual-strategy approach combining top-down hedge fund allocation with bottom-up manager selection, targeting long-term capital appreciation with moderate beta exposure to China's A-share market.
- • The fund addresses a critical market gap created by China's new asset management regulations, which shifted the market from guaranteed-return to NAV-based products while presenting investors with a large and dispersed hedge fund universe.
- • Xia Kun, portfolio manager with 15 years of capital markets experience including 5 years managing onshore products, leads the fund, which emphasizes diversification across core and tactical managers to mitigate systemic risk.
- • The launch expands UBS Asset Management's onshore presence in China following its receipt of a private fund management license, positioning the firm to capitalize on institutional demand for actively-managed, high-quality fund products.
Summary
UBS Asset Management achieved a significant regulatory milestone by launching the first onshore fund of hedge funds by a foreign asset manager in China. Announced on July 15, 2019, the "UBS (CN) A&Q China Diversified Fund of Funds" was established through UBS Asset Management (Shanghai) Ltd., the firm's wholly foreign-owned enterprise, and submitted for filing with the Asset Management Association of China (AMAC). This development marks a strategic expansion of UBS's footprint in the world's second-largest economy amid evolving regulatory frameworks.
The fund addresses structural inefficiencies in China's institutional investment landscape. Following implementation of new asset management regulations that eliminated guaranteed-return products in favor of net asset value (NAV)-based structures, Chinese institutional investors faced challenges navigating a fragmented hedge fund market characterized by significant performance dispersion and opacity. By offering a curated, professionally managed fund of funds vehicle, UBS provides institutional clients with enhanced due diligence, reduced idiosyncratic risk, and streamlined access to China's private securities ecosystem.
The investment strategy combines macro-level hedge fund allocation with granular manager selection. According to Xia Kun, the fund's portfolio manager, the approach "incorporates a top-down hedge fund strategy allocation and bottom-up manager selection" to achieve long-term capital appreciation while maintaining moderate beta exposure to the China A-share market and controlled volatility across economic cycles. Portfolio construction deliberately blends core and tactical managers to navigate market shifts while limiting systemic risk concentration. Xia brings 15 years of capital markets experience, including 5 years managing products within China's onshore market, providing institutional-grade stewardship.
This launch follows UBS Asset Management's earlier achievement of becoming the first qualified domestic limited partner license holder to receive a private fund management license in China, enabling the firm to establish multiple onshore products. The fund of funds launch represents a natural extension of this capability and reflects UBS's confidence in China's institutional asset management market amid regulatory maturation and growing demand for sophisticated, diversified investment solutions.
The fund addresses structural inefficiencies in China's institutional investment landscape. Following implementation of new asset management regulations that eliminated guaranteed-return products in favor of net asset value (NAV)-based structures, Chinese institutional investors faced challenges navigating a fragmented hedge fund market characterized by significant performance dispersion and opacity. By offering a curated, professionally managed fund of funds vehicle, UBS provides institutional clients with enhanced due diligence, reduced idiosyncratic risk, and streamlined access to China's private securities ecosystem.
The investment strategy combines macro-level hedge fund allocation with granular manager selection. According to Xia Kun, the fund's portfolio manager, the approach "incorporates a top-down hedge fund strategy allocation and bottom-up manager selection" to achieve long-term capital appreciation while maintaining moderate beta exposure to the China A-share market and controlled volatility across economic cycles. Portfolio construction deliberately blends core and tactical managers to navigate market shifts while limiting systemic risk concentration. Xia brings 15 years of capital markets experience, including 5 years managing products within China's onshore market, providing institutional-grade stewardship.
This launch follows UBS Asset Management's earlier achievement of becoming the first qualified domestic limited partner license holder to receive a private fund management license in China, enabling the firm to establish multiple onshore products. The fund of funds launch represents a natural extension of this capability and reflects UBS's confidence in China's institutional asset management market amid regulatory maturation and growing demand for sophisticated, diversified investment solutions.
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