Cederberg Capital, a hedge fund invested in Chinese stocks, has lowered investor fees after its returns continue to suffer by China’s reluctance to loosen its COVID policies.
Hedge fund manager Dawid Krige told investors in a letter seen by Reuters he would drop fees by 25 basis points “given the difficulty our clients have endured over the past 21 months.” This will reduce fees for Cederberg Capital’s China Class A and Class B vehicles to 1.25 per cent and 1.0 per cent respectively, effective on Jan. 1, 2023.
The MSCI China index is down almost a third this year, as China’s top leadership body, the Politburo Standing Committee, has stuck to a “dynamic-zero” COVID policy meant to keep a lid on China’s death toll.
Since 2020, China has reported 5,226 COVID fatalities among its population of 1.4 billion. In contrast, over 1 million people have died of the disease in the United States.
Krige’s hedge fund, which has around $1 billion in assets under management, is down about 56 per cent so far this year, according to his letter.
Despite that, Krige said this was a “potentially once in a decade opportunity” to buy Chinese stocks.
He warns that his fund is not for the short-term investor, saying that within the next ten years, the cheap valuations his stocks hold today will wind up being a bargain.
Krige’s biggest positions include the Chinese property developer C&D International Investment Group Ltd, the Hong Kong Financial Exchange, JD.com in China, the social network Prosus and Guangdong GR, an infrastructure fund.
Chinese markets have been hit by outflows in recent months with investors rethinking their exposure to the world’s second- largest economy. Data from the Institute of International Finance showed Chinese stock portfolios had lost $7.6 billion in October, the biggest monthly outflows since March.
Money managers have increasingly launched emerging market or Asia investment products with no exposure to China to meet increasing demand for such strategies from global investors.
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